Honda's Recovery Hits Overdrive On Solid Results

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Honda Motor Co ( HMC ) posted strong Q1 results as production and sales reached pre-quake levels. Of all the automakers, Honda was hurt the most due to last year's natural disasters. Apart from the tragic tsunami, floods in Thailand impacted the automaker's production and supply chain negatively. Total revenues for the quarter jumped 42% to 2,436 billion yen, or $31.2 billion while operating income for the quarter stood at 176 billion yen. For fiscal 2013, Honda forecasts its operating income to climb 168% to 620 billion yen ($7.9 billion).

We have a price estimate of $44 for Honda Motors , and we are in the process of revising our estimates to incorporate Q1 earnings.

Significantly Higher Volumes

Net income surged more than 300% to 131.7 billion yen. Overall, Honda sold almost 60% more automobile units this quarter than it did in the previous year quarter. Total automobile sales doubled in Japan as well as North America. The company reported operating margins for automobiles at 5.3%, which is an improvement from 2.4% in the previous quarter and a negative 6.5% in the corresponding quarter last year. Japanese sales were buoyed by the introduction of N-Box, Freed Hybrid and Freed Spike Hybrid while sales in the North American region were helped by increased production of Accord and Civic as well as the introduction of new models such as CR-V, RDX and ILX . North America is Honda's biggest market in terms of the number of vehicles sold. North American sales for the remainder of the year will be contingent on how the new Accord (to be introduced later in the year) will perform.

Asian automobile sales grew 22% helped by strong City sales in Thailand and Brio sales in India. Honda is betting on Asian countries such as Indonesia and India to fuel future growth. In Indonesia, the automaker is in the process of expanding manufacturing capacity which will triple its output to 180,000 vehicles from 60,000 currently. And, in India, Honda is targeting to double the sales in the next four years through the introduction of new models and aggressive promotions.

Motorcycle sales jumped 12.5% to 3.9 million units, but profitability was hurt due to a strong Yen. The company reported margins dropped to 10.6% from 13.6% in the previous year. However, on a sequential basis, the margins are still up highlighting that Honda's process of recovery is under way.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: F , GM , HMC , TM

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