Toyota (TM) Q2 Earnings Preview: A Surprise in Store?

Zacks

Toyota Motor Corporation TM is set to report second-quarter fiscal 2016 (ended Sep 30, 2015) results on Nov 5. In the last quarter, it had posted a positive earnings surprise of 14.63%. Let’s see how things are shaping up for this announcement.

Factors Influencing this Quarter

Toyota sold 4.98 million vehicles globally during the six months ended Sep 30, 2015, down 1.1% year over year. While the lower sales volume will have a negative impact on the company’s revenues in the second quarter, Toyota will benefit from favorable foreign currency fluctuations.

Moreover, the company recorded an increase in earnings, operating income and revenues in the first quarter of fiscal 2016. Also, it provided a favorable outlook for these financial metrics for the fiscal year. This raises expectations of a year-over-year increase in these metrics for the second quarter of fiscal 2016.

Earnings Whispers

Our proven model does not conclusively show that Toyota is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: The Earnings ESP for Toyota is 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate both stand at $3.09.

Zacks Rank: Toyota carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Magna International Inc. MGA has an Earnings ESP of +0.92% and a Zacks Rank #3. The company is expected to report third-quarter 2015 results on Nov 5.

Advance Auto Parts Inc. AAP sports a Zacks Rank #1 (Strong Buy). The company’s third-quarter 2015 financial results are scheduled for release on Nov 12.

Superior Industries International, Inc. SUP – a Zacks Rank #2 (Buy) stock – will report its third-quarter financial numbers on Nov 3.

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