Toyota Motor Corporation (TM) is set to report second-quarter fiscal 2015 (ending Sep 30, 2014) financial results on Nov 5. In the last quarter, this Japanese auto manufacturer had posted a positive surprise of 17.6%. Let us see how things are shaping up for this announcement.
Factors to Consider
Toyota reported global sales of 7.62 million vehicles for the first nine months of 2014, retaining its position as the global leader. With this, the company remains on track to achieve its target of global sales volumes of 10.32 million units in 2014. If the company attains this forecast, it will become the first automaker to surpass the 10 million mark.
Strong sales volumes translate into improved earnings as well and the quarter to be reported is likely to reflect the same. Toyota's repurchase plan for 30 million shares announced in Mar 2014 following an improvement in its balance sheet and profitability, should also have a positive impact on the second-quarter earnings per share.
However, Toyota expects net earnings to fall 2.4% in fiscal 2015, indicating the possibility of a year-on-year decline in the upcoming quarterly earnings as well. Further, the company is among the automakers that reduced car parts’ prices in China following the National and Development Reform Commission’s antitrust probe into the auto industry. This would affect its revenues for the second quarter.
Earnings Whispers?
Our proven model does not conclusively show that Toyota is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below:
Zacks ESP: Toyota has an Earnings ESP of 0.00%. That is because the Most Accurate estimate and the Zacks Consensus Estimate both currently stand at $3.14 per share.
Zacks Rank: Toyota currently has a Zacks Rank #1 (Strong Buy). Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Other Auto Stocks Slated to Report
Meritor, Inc. (MTOR), with an Earnings ESP of +37.5% and a Zacks Rank #3 (Hold), is a stock in the auto sector that is expected to beat earnings this season. It will release its third-quarter earnings results on Nov 12.
Tata Motors Ltd. (TTM) will release third-quarter earnings on Nov 14. The company carries a Zacks Rank #1.
Power Solutions International, Inc. (PSIX) will post third-quarter results on Nov 6. The company has a Zacks Rank #1.
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