Honda Motor Co., Ltd. HMC reported a 19.6% increase in earnings to ¥186.0 billion ($1.52 billion) or ¥103.22 (84 cents) per share in the first quarter (ended Jun 30, 2015) of fiscal 2016 from ¥155.6 billion ($1.53 billion) or ¥86.34 (85 cents) per share in the year-ago quarter. Further, earnings per share comfortably surpassed the Zacks Consensus Estimate of 65 cents.
Consolidated net sales and other operating revenues went up 15.5% year over year to ¥3.70 trillion ($30.26 billion). The figure also surpassed the Zacks Consensus Estimate of $27.35 billion. The year-over-year increase can be attributed to higher revenues from automobile and financial services business operations, as well as favorable foreign currency translation effects.
Consolidated operating income increased 16.4% year over year to ¥239.3 billion ($1.95 billion) from ¥205.5 billion ($2.01 billion) in first-quarter fiscal 2015, backed by higher sales revenue and model mix, continuous cost-reduction efforts and favorable foreign currency effects, which offset the increase in selling, general and administrative (SG&A) expenses.
Segment Performance
Revenues in the Automobile segment rose 14.4% to ¥2.68 trillion ($21.85 billion) on favorable foreign currency translation effects, partially offset by a 0.9% decrease in consolidated unit sales to 888 thousand vehicles. Meanwhile, operating profit increased 18% to ¥130.7 billion ($1.07 billion) on a rise in sales volume and model mix, along with continuing cost-reduction initiatives and favorable currency effects that offset the increase in SG&A expenses.
Revenues in the Motorcycle segment went up 10.8% to ¥472.7 billion ($3.86 billion) on higher consolidated unit sales and favorable foreign currency translation effects. Consolidated unit sales grew 1.7% to 2.55 million motorcycles. Operating income increased 33.4% to ¥55.5 billion ($454 million) on higher sales volume and improved model mix, which offset the increase in SG&A expenses and the impact of unfavorable foreign currency effects.
Revenues in the Financial Services segment augmented 30% to ¥473.6 billion ($3.87 billion) on the back of higher revenues from operating leases and sales of returned lease vehicles as well as favorable foreign currency translation effects. Also, operating income improved 5.7% to ¥52.4 billion ($428 million), attributable to positive foreign currency effects, which offset the rise in SG&A expenses.
Revenues in the Power Product and Other segment stood at ¥82.5 billion ($674 million), up 6.2% from the year-ago level. The increase was driven by favorable foreign currency translation effects. Unit sales in the segment went down 1.2% to 1.56 million. The segment’s operating profit plunged 84.6% to ¥0.5 billion ($4 million) due to unfavorable currency effects and higher expenses in other businesses.
Financial Position
Consolidated cash and cash equivalents increased to ¥1.65 trillion ($13.6 billion) as of Jun 30, 2015 from ¥1.47 trillion ($14.4 billion) as of Mar 31, 2015.
In first-quarter fiscal 2016, cash flow from operations increased to ¥415.9 billion ($3.44 billion) from ¥133.1 billion ($1.3 billion) in the year-ago comparable quarter. This improvement was driven by an increase in cash received from customers, partially offset by increased payments for parts, raw materials and purchase of equipment on operating leases. Meanwhile, capital expenditures rose to ¥187.1 billion ($1.55 billion) in first-quarter fiscal 2016 from ¥173.6 billion ($1.7 billion) in first-quarter fiscal 2015.
Guidance
For fiscal 2016, Honda expects revenues to increase 8.8% to ¥14.5 trillion ($126.1 billion). Operating income is likely to rise 2.1% to ¥685 billion ($5.96 billion). Net income is projected to improve 3.1% to ¥525 billion ($4.57 billion) or ¥291.30 ($2.53) per share.
Zacks Rank
Currently, Honda carries a Zacks Rank #4 (Sell). Better-ranked automobile stocks include Tesla Motors, Inc. TSLA, PACCAR Inc. PCAR and Pep Boys – Manny, Moe & Jack PBY. Pep Boys currently sports a Zacks Rank #1 (Strong Buy), while both PACCAR and Tesla carry a Zacks Rank #2 (Buy).
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