Honda Motor Co., Ltd.
) is set to report third-quarter fiscal 2015 results on Jan 30. In
the last quarter, it had posted a negative earnings surprise of
5.26%. Let's see how things are shaping up for this announcement.
Factors Influencing this Quarter
Honda is currently focused on introducing new products and
expanding its business in Asia, especially in India and Indonesia,
to attract more customers. For fiscal 2015, operating income is
likely to rise 2.6% to ¥770 billion. These should translate into
higher revenues and operating income in the third quarter as well.
However, Honda reduced its net income guidance by 5.8% to ¥565
billion or ¥313.49 per share for fiscal 2015. The company also
reduced its revenue guidance to ¥12.75 trillion from ¥12.8 trillion
projected earlier. Honda, like most automakers, faces the challenge
of frequent product recalls over the last few years. It is the
largest customer of the Takata, whose faulty airbags have resulted
in massive recalls by many automakers. The company has recalled
nearly 13.4 million vehicles due to this problem, which will
increase its expenses. Honda has also agreed to pay a cumulative
fine of $70 million to the U.S. safety regulators for its failure
to report hundreds of injuries, deaths and other consumer claims
related to its vehicles.
Our proven model does not conclusively show that Honda is likely to
beat earnings this quarter. This is because a stock needs to have
both a positive
and a Zacks Rank #1, 2 or 3 for this to happen. This is not the
case here, as you will see below:
The Earnings ESP represents the difference between the Most
Accurate estimate and the Zacks Consensus Estimate. Honda's
Earnings ESP is 0.00% as the Most Accurate estimate and the Zacks
Consensus Estimate both stand at 55 cents.
Honda carries a Zacks Rank #4 (Sell). We caution against stocks
with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the
earnings announcement, especially when the company is seeing
negative estimate revisions, as is the case with Honda.
Stocks to Consider
Here are some companies you may want to consider as our model shows
that these have the right combination of elements to post an
earnings beat this quarter:
O'Reilly Automotive Inc. (
) has an Earnings ESP of +2.40% and a Zacks Rank #2 (Buy). The
company will report its fourth-quarter 2014 results on Feb 4.
Lear Corp. (
) has an Earnings ESP of +1.46% and a Zacks Rank #2. The company's
fourth-quarter financial results are scheduled for release on Jan
AutoNation Inc. (
) has an Earnings ESP of +1.10% and a Zacks Rank #3 (Hold). The
company will release its fourth-quarter earnings results on Feb 3.
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