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Is a Surprise in Store for Toyota (TM) in Q3 Earnings?

Toyota Motor CorporationTM is set to report third-quarter fiscal 2017 (ended Dec 31, 2016) results on Feb 6. In the last quarter, the company posted a positive earnings surprise of 18.40%. Let's see how things are shaping up for this announcement.

Factors Influencing this Quarter

Toyota expects consolidated revenues, operating income and net earnings to decline in fiscal 2017. This leads to expectations of weak results in the quarter to be reported. The high number of recalls related to the defective Takata airbag inflators may also lead to higher expenses.

Starting Apr 2016, Toyota changed its corporate structure to increase the efficiency of its work processes, facilitate faster decision making and fortify functions. This restructuring helped convert the company into a product-based organization from a function-based one. Further, the Toyota New Global Architecture ("TNGA") initiative focuses on improving the product development process and increasing the competitiveness of production sites. Toyota announced a plan to realign its North American manufacturing operations with the TNGA initiative. These efforts should drive the company's earnings.

Earnings Whispers

Our proven model does not conclusively show that Toyota is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below:

Zacks ESP: The Earnings ESP for Toyota is 0.00% because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $2.14. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Toyota Motor Corp Ltd Ord Price and EPS Surprise

Toyota Motor Corp Ltd Ord Price and EPS Surprise | Toyota Motor Corp Ltd Ord Quote

Zacks Rank: Toyota carries a Zacks Rank #3 which increases the predictive power of ESP. However, the company's 0.00% ESP makes surprise prediction difficult.

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.

Price Performance

Toyota underperformed the Zacks categorized Automotive-Foreign industry over the last one year. Share price of the company increased 0.3% during this period, while the industry saw a 6% increase. The underperformance was largely due to the slashed guidance for earnings, operating income and revenues for fiscal 2017. Settlement of a U.S. truck lawsuit, string of product recalls and declining sales outside Japan also hurt the share price.

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:

Cummins Inc. CMI has an Earnings ESP of +0.99% and a Zacks Rank #2. The company is slated to report fourth-quarter and full-year 2016 results on Feb 9. You can see the complete list of today's Zacks #1 Rank stocks here.

Magna International Inc. MGA has an Earnings ESP of +0.74% and a Zacks Rank #3. The company's fourth-quarter and full-year 2016 financial results is expected to release on Feb 24.

American Axle & Manufacturing Holdings, Inc. AXL has an Earnings ESP of +2.94% and a Zacks Rank #3. The company is scheduled to report fourth-quarter and full-year 2016 financial numbers on Feb 10.

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Toyota Motor Corp Ltd Ord (TM): Free Stock Analysis Report

American Axle & Manufacturing Holdings, Inc. (AXL): Free Stock Analysis Report

Magna International, Inc. (MGA): Free Stock Analysis Report

Cummins Inc. (CMI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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