Toyota Motor Corp. ( TM - Analyst Report ) showed marked recovery by posting a significant ¥91.31 increase in earnings to ¥91.68 per share ($1.14) in the first quarter of its fiscal year ending March 31, 2013 due to strong demand for its vehicles and positive impact of cost reduction measures.

However, the company’s profits failed to meet the Zacks Consensus Estimate of $1.93 per share during the quarter. Total profit surged ¥289.19 billion to ¥290.35 billion ($3.62 billion) from ¥1.16 billion a year ago.

Consolidated revenues soared 60% to ¥5.50 trillion ($68.66 billion) in the quarter. Unit sales increased 86% to 2.27 million vehicles during the quarter led by higher sales in all the regions including Japan (97%), North America (140%), Europe (20%) and Asia (61%), and Other reporting regions (83%).

Operating income increased by ¥461.10 billion to ¥353.14 billion ($4.41 billion) from a loss of ¥107.96 billion in the year-ago quarter. Favorable effects from marketing activities of ¥440.0 billion ($5.49 billion) and cost reduction efforts of ¥70.0 billion ($8.74 billion) boosted operating income, partially offset by negative effects from currency fluctuations of ¥40.0 billion ($499.2 million).

Segment Results

In the Automotive segment, revenues magnified 67% to ¥5.12 trillion ($63.90 billion) in the quarter while operating income increased ¥461.24 billion to ¥258.69 billion ($3.23 billion) from a loss of ¥202.54 billion a year ago. The improvement in operating income was attributable to increases in production volume and vehicle unit sales as well as positive impact from cost reduction measures.

In the Financial Services segment, revenues ebbed 4% to ¥267.89 billion ($3.34 billion) while operating income dipped 8% to ¥86.73 billion ($1.08 billion) from ¥94.61 billion in the year-ago quarter. The decrease in operating income was attributable to credit losses including provision and reversal in sales finance subsidiaries.

In All Other businesses, revenues grew 15% to ¥123.00 billion ($1.54 billion) in the quarter. Operating income rose ¥11.28 billion to ¥9.33 billion ($116.44 million) from a loss of ¥1.95 billion in fiscal 2012-quarter.

Financial Position

Toyota had cash and cash equivalents of ¥1.73 trillion ($21.57 billion) as of June 30, 2012, an increase from ¥1.68 trillion as of March 31, 2012. Total debt amounted to ¥11.73 trillion ($146.35 billion) as of June 30, 2012 compared with ¥12.00 trillion as of March 31, 2012, both reflecting a debt-to-capitalization ratio of 53%.

In the quarter, Toyota’s operating net cash flow more than doubled to ¥702.69 billion ($8.77 billion) from ¥316.35 billion in the prior-year quarter, primarily driven by higher profits. Meanwhile, capital expenditures (net) increased to ¥173.06 billion ($2.16 billion) from ¥167.13 billion a year ago.

Outlook

For fiscal 2013 ending March 31, 2013, Toyota projected consolidated vehicles sales of 8.80 million units, up 100 thousand units from the prior guidance. However, the company reiterated its guidance for consolidated revenues of ¥22.00 trillion (up 18.4% from fiscal 2012), operating income of ¥1.00 trillion (181.2%) and profits of ¥760.0 billion (168.0%) for the fiscal year.

Our Take

Toyota is the leading automaker in the world. Its product portfolio consists of a full range of models from passenger cars, minivans and trucks as well as related parts and accessories.

The company’s domestic competitors include Honda Motor Co. ( HMC - Analyst Report ) and Nissan Motor Co. ( NSANY ) . Despite better results, the company to currently retains a Zacks #3 Rank on its shares, which translates to a short-term (1 to 3 months) rating of Hold, due to the global economic weakness.

(Exchange rate: $1 = ¥80.13)