Toyota Profits Rise, Ups Guidance

Toyota Motor Corp. ( TM - Analyst Report ) posted a 22.2% rise in earnings per share (EPS) to ¥31.55 (39 cents) in the third quarter of fiscal 2013 ended on Dec 31, 2013 from ¥25.81 in the same quarter of prior fiscal year. The EPS was lower than the Zacks Consensus Estimate of $1.23.

Net income rose 23.4% to ¥99.91 billion ($1.23 billion) from ¥80.94 billion a year ago. The increase was attributable to lower provision for income taxes during the quarter.

Revenues increased 9.3% to ¥5.32 trillion ($65.56 billion) on a 7.3% rise in unit sales to 2.11 million vehicles. Among all the geographic markets, unit sales rose at the fastest pace in Asia (53.4%) and declined at the fastest pace in Japan (15.0%).

Operating income dipped 16.7% to ¥124.76 billion ($1.54 billion) from ¥149.68 billion in the third quarter of previous fiscal year. The decline was attributable to a 10.1% rise in costs and expenses during the quarter.

Segment Results

In the Automotive segment, revenues escalated 9.3% to ¥4.88 trillion ($60.14 billion). However, operating profit decreased 23.5% to ¥43.72 billion ($538.94 million) due to higher operating expenses.

In the Financial Services segment, revenues went up 11.5% to ¥293.93 billion ($3.62 billion). Nevertheless, operating profits dipped 17.3% to ¥69.05 billion ($851.08 million) due to the impact of credit losses including provision and reversal in sales finance subsidiaries.

In All Other segment, revenues scaled up 5.9% to ¥145.59 billion ($1.79 billion). Operating income inched up 1.0% to ¥15.42 billion ($190.08 million) due to lower operating expenses.

Financial Position

Toyota had cash and cash equivalents of ¥1.24 trillion ($15.30 billion) as of Dec 31, 2012 compared with ¥1.68 trillion as of Mar 31, 2012. Total debt decreased to ¥8.85 trillion ($158.97 billion) as of Dec 31, 2012 from ¥12.0 trillion as of Mar 31, 2012. However, debt-to-capitalization ratio remained almost stable at 53.4% compared with 52.0% as of Mar 31, 2012.

In the first nine months of fiscal 2013, Toyota’s net cash flow from operations improved to ¥1.75 trillion ($21.52 billion) from ¥770.69 billion in the same period of prior fiscal year, primarily driven by a significant rise in profits, increase in deferred income taxes and favorable changes in operating assets and liabilities, and other. Capital expenditures (net) increased to ¥544.74 billion ($6.71 billion) from ¥441.85 billion a year ago.

Guidance Raised

For fiscal 2013 ending March 31, 2013, Toyota raised its consolidated vehicle sales guidance to 8.85 million units from 8.75 million units. Consequently, the automaker projected higher consolidated revenues of ¥21.80 trillion (reflecting an expected increase of 17.3%) compared with fiscal 2012. The upward revision of sales outlook was based on higher overseas vehicle sales, primarily in North America

The company also expects operating income guidance of ¥1.15 trillion (up 223.4% from fiscal 2012) and net income of ¥860.0 billion (203.3%) 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. Despite better results, the company currently retains a Zacks #4 Rank on its shares, which translates to a short-term (1 to 3 months) rating of Sell.

Few stocks that are performing well in the industry where the company operates include Oshkosh Corporation ( OSK - Snapshot Report ) , Commercial Vehicle Group Inc. ( CVGI - Snapshot Report ) and STRATTEC SECURITY CORPORATION ( STRT - Snapshot Report ) . These stocks carry a Zacks Rank #1 (Strong Buy).