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Honda (HMC) Q1 Loss Narrower Than Expected, Sales Lag Estimates

Honda Motor Co., Ltd. HMC reported a loss of 44 cents per ADR in first-quarter fiscal 2021, much narrower than the Zacks Consensus Estimate of loss of 70 cents. The company had reported earnings of 89 cents per share in the year-ago quarter.

Depressed demand for vehicles and sinking consumer sentiment amid the coronavirus crisis resulted in this underperformance. Quarterly revenues plunged 45.7% year over year to $19,747 million, missing the Zacks Consensus Estimate of $20,114 million.

Honda Motor Co., Ltd. Price, Consensus and EPS Surprise

Honda Motor Co., Ltd. Price, Consensus and EPS Surprise

Honda Motor Co., Ltd. price-consensus-eps-surprise-chart | Honda Motor Co., Ltd. Quote

Segmental Highlights

For the three-month period ended Jun 30, 2021, revenues from the Automobile segment plummeted 53.4% year over year to ¥1.26 trillion ($11.7 billion) amid lower sales in India, the United States and China. Consequently, the segment incurred operating loss of ¥195 billion ($1.82 billion), as against income of ¥120.4 billion in the year-ago quarter. Lower sales and negative foreign-currency translation impact offset the benefits of cost-cutting initiatives to a large extent.

Revenues from the Motorcycle segment came in at ¥274.2 billion ($2.55 billion), significantly down 48.6% year over year on soft unit sales in Indonesia and Thailand. The unit’s operating profit slumped 84% from the year-ago period to ¥11.2 billion ($104 million) due to cost reduction, and decrease in selling, general and administrative expenses.

Revenues from the Financial Services segment totaled ¥579 billion ($5.4 billion), down 16.3% year on year. However, the unit’s operating profit increased 8.8% year over year to ¥71.6 billion ($666 million).

Revenues from Life Creation and Other Business came in at ¥68.2 billion (633.4 million), down 20% year over year. The segment incurred an operating loss of ¥573 million ($5.33 million), which narrowed from the loss of ¥3.57 billion posted in the corresponding period of the prior year.

Dividend & Financial Position

The company announced a quarterly dividend of ¥11 per share for shareholders. Total annual dividend per share to be paid for fiscal 2021 will be ¥44 per share.

Consolidated cash and cash equivalents were ¥2.61 trillion ($24.2 billion) as of Jun 30, 2021. Long-term debt was ¥4.31 trillion ($39.9 billion).

2021 Outlook

For fiscal 2021, the company expects sales and operating profit of ¥12.8 trillion and ¥200 billion, respectively. Further, it anticipates earnings per share of ¥95.56 per share in the fiscal year.

Zacks Rank & Stocks to Consider

Honda currently carries a Zacks Rank of 4 (Sell).

Some better-ranked stocks in the auto sector include AutoNation AN, LCI Industries LCII and Geely Automobile Holdings Ltd. GELYY. While AutoNation and LCI Industries sport a ZacksRank of 1, Geely Automobile carries a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of AutoNation have rallied 9.6%, year to date, compared with the industry’s gain of 7.8%.

Shares of LCI Industries have appreciated 19.6%, year to date, as against the industry’s decline of 6.1%.

Shares of Geely Automobile have gained 13%, year to date, as against the industry’s decline of 11.6%.

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