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Honda Motor Co. Ltd. (HMC - Analyst Report) posted a 107.6% rise in earnings to ¥160.7 billion ($1.53 billion) or ¥89.18 (85 cents) per share in the third quarter (ended Dec 31, 2013) of fiscal 2014 from ¥77.4 billion or ¥42.97 (41 cents) per share in the same quarter of the prior fiscal year. However, earnings per share lagged behind the Zacks Consensus Estimate of 86 cents.
Consolidated net sales and other operating revenues grew 24.5% to ¥3.02 trillion ($22.7 billion) but remained less than the Zacks Consensus Estimate of $28.95 billion. The year-over-year increase was attributable to higher revenues in the automobile and motorcycle business operations as well as favorable foreign currency translation effects.
Consolidated operating income surged 73.2% to ¥228.5 billion ($2.17 billion) from ¥131.9 billion in the third quarter of fiscal 2013, driven by higher sales volume and model mix along with favorable foreign currency effects and cost reduction initiatives. The increase was, however, partially offset by higher selling, general and administrative (SG&A) expenses.
Revenues in the Automobile segment rose 23.9% to ¥2.37 trillion ($22.5 billion) due to a 7% rise in consolidated unit sales to 900,000 vehicles and favorable foreign currency translation effects. Operating profit surged 117.5% to ¥154.2 billion ($1.46 billion) on the back of increased sales volume and model mix, favorable foreign currency effects and cost reduction initiatives but was partially offset by increased SG&A expenses.
Revenues in the Motorcycle segment scaled up 30% to ¥400.1 billion ($3.8 billion), owing to higher consolidated unit sales and favorable foreign currency translation effects. Consolidated unit sales rose 13.1% to 2.7 million motorcycles. Operating income surged 51.4% to ¥34.5 billion ($328 million) on improved sales volume and model mix along with favorable foreign currency translations, partially offset by higher SG&A expenses.
Revenues in the Financial Services segment increased 29.3% to ¥175 billion ($1.7 billion) due to higher revenues from operating leases and favorable foreign currency translation effects. Operating income rose 12% to ¥42.7 billion ($405 million), attributable to favorable foreign currency effects.
Revenues in the Power Product and Other segment escalated 9.1% to ¥73.2 billion ($695 million) driven by favorable foreign currency translation effects. Unit sales in the segment inched down 2.8% to 1.16 million. The segment incurred operating loss of ¥2.8 billion ($28 million), due to increased SG&A expenses and lower sales volume and model mix in the power product business.
Consolidated cash and cash equivalents increased to ¥1.21 trillion as of Dec 31, 2013, from ¥1.2 trillion as of Mar 31, 2013. Total debt amounted to ¥5.99 trillion as of Dec 31, 2013, translating into a debt-to-capitalization ratio of 50.9%, compared with total debt of ¥4.9 trillion or a debt-to-capitalization ratio of 49.2% as of Mar 31, 2013.
In the first nine months of fiscal 2014, cash flow from operations improved to ¥870.4 billion from ¥532.6 billion in the first nine months of fiscal 2013, primarily as a result of higher cash receipts due to better automobile sales, which offset the increase in payments for parts and raw materials. Meanwhile, capital expenditures increased to ¥519 billion from ¥440.53 billion in the first nine months of fiscal 2013.
For fiscal 2014, Honda has projected revenues to increase 22.5% to ¥12.1 trillion. Operating income is expected to surge 43.2% to ¥780 billion and net income is anticipated to jump 58% to ¥580 billion or ¥321.81 per share. The company expects higher revenues, favorable model mix, effective cost reduction measures, favorable currency effect and favorable impact of raw material cost fluctuations to contribute to the increase in profits during the year.
Honda’s board of directors announced a quarterly dividend of ¥20 per share to shareholders of record as of Dec 31, 2013. The company is expected to make annual dividend payments of ¥80 per share in fiscal 2014.
Currently, shares of Honda retain a Zacks Rank #4 (Sell).
Some better-ranked automobile stocks worth considering are Tesla Motors, Inc. (TSLA - Analyst Report), Geely Automobile Holdings Ltd. (GELYY) and Dongfeng Motor Group Company Limited (DNFGY). Tesla carries a Zacks Rank #1 (Strong Buy), while the other two carry a Zacks Rank #2 (Buy).