On January 11, we maintained our Neutral recommendation on
Toyota Motor Corp.
) despite the challenging scenario in the Chinese and European
markets, based on its improved fiscal 2013-second quarter
earnings and opportunities from its expansion in the emerging
Toyota witnessed more than threefold increase in profits to
¥257.92 billion ($3.28 billion) or ¥81.44 ($1.04) per share in
the second quarter of fiscal 2013, ended Sep 30, 2012 from ¥80.42
billion or ¥25.65 in the same quarter of prior fiscal year.
The increase in profits was attributable to strong demand for
Toyota vehicles as well as positive impact from the cost-control
measures. However, profits were lower than the Zacks Consensus
Estimate of $1.62 per share. Revenues in the quarter grew 18.2%
to ¥5.41 trillion ($68.75 billion) on a 14.9% rise in sales
volume to 2.16 million units.
Following the release of the second quarter results, the Zacks
Consensus Estimate for fiscal 2013 declined 1.9% to $7.18 per
share. Meanwhile, the Zacks Consensus Estimate for fiscal 2014
declined 1.7% to $8.11 per share.
Toyota occupies the leading position in the hybrid cars market
offering Toyota and Lexus brands of vehicles as well as the Prius
hybrids. Since 1997, the automaker sold more than 3.4 million
hybrid vehicles until December last year. The company plans to
launch about 21 gas-electric hybrid vehicles together with a fuel
cell vehicle by 2015.
Toyota is expanding its foothold in the emerging markets to
improve its sales volume. The automaker plans to launch 8 compact
car models in the emerging markets of Brazil, China, India and
Indonesia by 2015 in order to compete with the leading automakers
in the market. Toyota also plans to manufacture the new vehicles
in the emerging countries to reap the benefit of low cost
However, the past series of recalls have damaged Toyota's
reputation. Further, it continues to face difficulties from
strengthening of yen and power shortages in Japan due to the
meltdowns at Fukushima Daiichi nuclear power plant after the
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) is performing well in the same industry, where Toyota operates.
It retains a Zacks Rank #2 (Buy).
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