On Mar 17, 2015, we issued an updated research report on Honda Motor Co., Ltd. HMC. This Zacks Rank #4 (Sell) stock has reported positive earnings surprises in three of the trailing four quarters with an average beat of 4.1%.
Honda's earnings decreased 15.1% to ¥136.5 billion ($1.13 billion) or ¥75.75 ($0.63) 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 $0.55.
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.
Honda’s focus on product, technology and infrastructure development, and rapid expansion in Asia are tailwinds. However, high expenses and frequent safety recalls are concerns.
For fiscal 2015, Honda expects net income to drop 5.1% to ¥545 billion or ¥302.39 per share, lower than the previous guidance of ¥565 billion or ¥313.49 per share. The decline is expected despite a projected revenue increase of 8.9% to ¥12.9 trillion. Operating income is also expected to decrease 4% to ¥720 billion. Moreover, Honda will not be able to meet its target of selling 6 million cars a year by Mar 2017.
Key Picks from the Sector
Better-ranked automobile stocks include American Axle & Manufacturing Holdings Inc. AXL, Tata Motors Limited TTM and Gentherm Incorporated THRM, all sporting a Zacks Rank #1 (Strong Buy).
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