On Mar 14, 2014, we issued an updated research report on
Honda Motor Co., Ltd.
). The company's efforts to develop infrastructure and introduce
new products are helping in business expansion. However, we are
concerned about increasing selling, general and administrative
(SG&A) and research and development (R&D) expenses and
debt. Frequent product recalls are also disadvantageous.
Honda posted a 107.6% rise in earnings to ¥160.7 billion
($1.53 billion) or ¥89.18 (85 cents) per share in the third
quarter (ended Dec 31, 2013) of fiscal 2014 from ¥77.4 billion
($0.97 billion) or ¥42.97 (41 cents) per share in the same
quarter of the prior fiscal year. However, earnings per share
lagged behind the Zacks Consensus Estimate of 86 cents.
Consolidated net sales and other operating revenues grew 24.5%
to ¥3.02 trillion ($22.7 billion) but remained less than the
Zacks Consensus Estimate of $28.95 billion. The year-over-year
increase was attributable to higher revenues in the automobile
and motorcycle business operations as well as favorable foreign
currency translation effects.
For fiscal 2014, Honda has projected revenues to increase
22.5% to ¥12.1 trillion ($121 billion). Operating income is
expected to surge 43.2% to ¥780 billion ($7.8 billion) and net
income is anticipated to jump 58% to ¥580 billion ($5.8 billion)
or ¥321.81 ($3.22) per share. The company expects higher
revenues, favorable model mix, effective cost reduction measures,
positive currency effects and beneficial impact of raw material
cost fluctuations to contribute to the increase in profits during
Currently, shares of Honda retain a Zacks Rank #2 (Buy). Some
other automobile stocks worth considering are
Tata Motors Ltd.
Tesla Motors, Inc.
). Tata Motors and Daimler sport a Zacks Rank #1 (Strong Buy)
while Tesla is Zacks Rank #2 stock.
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