Honda Motor Co., Ltd. (HMC) posted a 15.1% decrease in earnings to ¥136.5 billion ($1.13 billion) or ¥75.75 (63 cents) per share in the third quarter (ended Dec 31, 2014) of fiscal 2015 from ¥160.7 billion or ¥89.18 per share in the year-ago quarter. However, earnings per share surpassed the Zacks Consensus Estimate of 55 cents.
Consolidated net sales and other operating revenues grew 8.9% year over year to ¥3.3 trillion ($27.3 billion). However, the figure fell short of the Zacks Consensus Estimate of $28.5 billion. The year-over-year increase can be attributed to higher revenues from the motorcycle businesses as well as favorable foreign currency translation.
Consolidated operating income fell 22.5% to ¥177.2 billion ($1.5 billion) from ¥228.6 billion in the third quarter of fiscal 2014, owing to decreased sales volume and model mix along with higher selling, general and administrative (SG&A) expenses including product warranty expenses, partially offset by effective cost control and favorable foreign currency translation effects.
Segment Performance
Revenues in the Automobile segment rose 7% to ¥2.5 trillion ($21.1 billion) on favorable foreign currency translation effects, partially offset by a decrease in consolidated unit sales of 2.6% to 877 thousand vehicles. Meanwhile, operating profit decreased 50.4% to ¥76.4 billion ($634 million) on a decline in sales volume and model mix, along with increased SG&A expenses including product warranty expense. This was partially offset by continued cost-reduction efforts and favorable foreign currency translation.
Revenues in the Motorcycle segment scaled up 15.8% to ¥463.4 billion ($3.8 billion), on higher consolidated unit sales and favorable foreign currency translation effects. Consolidated unit sales rose 4% to 2.8 million motorcycles. Operating income increased 55.2% to ¥53.5 billion ($444 million) on increased sales volume and model mix, and favorable foreign currency translation.
Revenues in the Financial Services segment increased 21.9% to ¥213.4 billion ($1.8 billion) on the back of higher revenues from operating leases and favorable foreign currency translation effects. Also, operating income improved 19.6% to ¥51 billion ($424 million), attributable to positive foreign currency translation effects.
Revenues in the Power Product and Other segment stood at ¥74.5 billion ($618 million), up 1.8% from the year-ago level. Unit sales in the segment went down 1.2% to 1.1 million. The segment’s operating loss was ¥3.8 billion ($32 million), attributable to unfavorable currency translation offset by decreased SG&A expenses.
Financial Position
Consolidated cash and cash equivalents increased to ¥1.33 trillion as of Dec 31, 2014, from ¥1.17 trillion as of Mar 31, 2014. Total debt amounted to ¥6.92 trillion as of Dec 31, 2014, translating into a debt-to-capitalization ratio of 50.5%, compared with total debt of ¥5.86 trillion and a debt-to-capitalization ratio of 49.7% as of Mar 31, 2014.
In the first nine months of fiscal 2015, cash flow from operations increased to ¥918.2 billion from ¥870.5 billion in the first nine of fiscal 2014. This came on the back of an increase in cash received from customers, driven by higher unit sales, partially offset by increased payments for parts and raw materials. Meanwhile, capital expenditures contracted to ¥489.8 billion in the first nine months of fiscal 2015 from ¥519 billion in the first nine months of fiscal 2014.
Guidance
For fiscal 2015, Honda expects revenues to increase 8.9% to ¥12.9 trillion. Operating income is likely to decrease 4% to ¥720 billion. Net income is projected to drop 5.1% to ¥545 billion or ¥302.39 per share.
Currently, Honda carries a Zacks Rank #4 (Sell).
Better-ranked automobile stocks include Toyota Motor Corp. (TM), Fuji Heavy Industries Ltd. (FUJHY) and Daimler AG (DDAIF), each sporting a Zacks Rank #2 (Buy).
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