Honda (HMC) Drives Past Q2 Earnings and Revenue Estimates

Honda Motor Co., Ltd. HMC reported consolidated income of ¥174 billion ($1.54 billion) or ¥96.6 per share (86 cents per ADR) in the second quarter of fiscal 2018 (ended Sep 30, 2017). Earnings per share surpassed the Zacks Consensus Estimate of 49 cents.

Consolidated sales revenues increased 15.7% year over year to ¥3.78 trillion ($33.5 billion). The figure surpassed the Zacks Consensus Estimate of $31.4 billion. The year-over-year increase can be attributed to higher revenues in all business operations and positive foreign currency conversion effects.

Consolidated operating profit came in at ¥152.9 billion ($1.36 billion), reflecting a decrease of 32.9% from that of prior-year quarter. The decline was due to the loss pertaining to the settlement of litigation and the reverse impact of pension plan amendment. These factors were offset by lower selling, general and administrative (SG&A) expenses, and a rise in sales volumes and model mix.

Segment Performance

For the six months ended Sep 30, 2017, sales revenues in the Automobile segment increased 8.2% to ¥5.24 trillion ($46.5 billion). In the first six months of fiscal year 2018, unit sales increased 5.3% from the year-ago period to 2.56 million vehicles.

For the six months ended Sep 30, 2017, revenues in the Motorcycle segment rose 21% to ¥1.02 trillion ($9 billion), on an 11.8% increase in unit sales to 9.94 million.

For the six months ended Sep 30, 2017, revenues in the Financial Services segment improved 18.1% to ¥1.07 trillion ($9.5 billion).

For the six months ended Sep 30, 2017, revenues in the Power Product and Other segment rose 5.9% to ¥160.7 billion ($1.43 billion) in the reported quarter.

Financial Position

Consolidated cash and cash equivalents were ¥2.21 trillion ($19.6 billion) as of Sep 30, 2017, increasing ¥2.11 trillion ($18.7 billion) as of Mar 31, 2017.

Guidance

For fiscal 2018 (ending Mar 31, 2018), Honda expects revenues to improve 7.5% to ¥15.1 trillion ($133.9 billion). Operating income is likely to decline 11.4% to ¥745 billion ($6.61 billion). Profit before income taxes is projected to decline 5.2% to ¥955 billion ($8.47 billion).

Zacks Rank & Key Picks

Currently, Honda has a Zacks Rank #4 (Sell).

A few better-ranked companies in the auto space are Daimler AG DDAIF, BorgWarner Inc. BWA and Ford Motor Company F, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Daimler has an expected long-term growth rate of 2.8%.

BorgWarner has an expected long-term growth rate of 9%.

Ford has an expected long-term growth rate of 12.3%.

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