After suffering more hits than a crash test dummy over the
past five years, Toyota Motors (
) is beginning to show signs it is back on track. May sales in
the U.S. were 87% higher than a year ago.
That's a nice shift for the Japanese automaker. In a timeline
they'd probably love to forget, Toyota's first pothole hit with
the sudden acceleration recall that broke in 2009 and bled into
2010, which was already going to be a rough year to sell cars and
trucks given the global recession. Then just as global economies
and auto sales were revving back up, Toyota's operations suffered
major dislocations in the wake of Japan's devastating March 2011
earthquake and tsunami. Forty-five percent of Toyota's production
is based in Japan. Later in 2011 Toyota took another hit when
massive flooding in Thailand forced key suppliers off line.
That succession of events pushed Toyota from the top spot
among the world's auto manufacturers down to No. 3, behind
General Motors (
) and Volkswagen.
Add it all up, and as the graph below shows, from the end of
2008 through 2011 Toyota shareholders have had an unsatisfying
ride to nowhere.
TM Total Return Price
Global production in April was 125% higher than a year ago.
That continues a strong trend of increasing production. December
2011 production was 10.7% higher, January saw a 27.8% uptick and
March production rose 59.6% from the prior year. Sales are
following in step. Toyota has forecast a 17.6% sales increase for
its 2013 fiscal year that ends in March 2013.
The firm expects that if the yen stays in its current trading
range of about 80 yen to the dollar, it expects operating income
to jump 180% in FY 2013:
TM Income from Cont. Ops
Morningstar analyst Dave Whiston recently said he thinks there
will be "a very positive earnings surprise" from Toyota later on
this calendar year. That would end a near three-year stretch of
earnings pretty much stuck in neutral:
Earnings Per Share
Toyota's share price has begun to reflect the turnaround:
TM Total Return Price
But as measured by
price to book value
, Toyota still trades more than 50% below its pre-crises
TM Price / Book Value
The rebound in U.S. auto sales is a nice tailwind for all auto
US Auto Sales
It's also the anchor for Toyota's most important region; North
American sales represent 28% of sales for Toyota. Japan sales
account for 26% of business. Given that the average age of cars
on the road in the U.S. is now a record 10.8 years -- 20% higher
than the average a decade earlier -- there still seems to be room
for continued growth, absent a Europe-induced recession. And
speaking of Europe, that market represents just 11% of Toyota
sales, somewhat mitigating the impact of a sales slowdown there
amid spreading economic woes.
A key piece of Toyota's turnaround plan is focused on emerging
markets. Toyota EVP Yukitoshi Funo recently said the firm's goal
is for emerging markets to represent 50% of global sales by 2015,
up from the current 40% level today. That effort will focus on
fuel-efficient compact cars. Toyota aims to sell 1 million of its
small fry into emerging markets by 2015, which represents more
than one-third the firm's total sales into Asia (ex-Japan) and
Central and South America for its just-completed 2012 fiscal year
(TM operates on a April 1 FY calendar).
The Prius is another key piece of the puzzle. Automotive News
reports the once fringe offering was the third-best selling car
in the world in the first quarter of 2012, behind Toyota's
Corolla and the Ford Focus. Sending eight new models onto the
showroom has helped push volume.
The strength of the Japanese yen in calendar year 2011 was a
major roadblock. The company says when the value of the Yen vs.
the U.S. dollar falls below 80, it loses money on its compact
sales. And during the height of last summer's global fears, the
yen dropped from a pre-earthquake level of 83 to the U.S. dollar,
US Dollar to Japanese Yen Exchange Rate
As fears of a global recession abated, the yen-to-dollar eased
back to 83 this past spring. But in the past month, as fears of a
yet another global slowdown have picked up, the yen has edged
below 80 once again. Toyota's forecast for its current fiscal
year is based on an 80 exchange rate. That's the potential
pothole in Toyota's road to recovery to keep a lookout for.
Carla Fried is an editor for the
YCharts Pro Investor Service
which includes professional