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Bull of the Day: Toyota Motor (TM)

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There are definitely some concerns over ‘peak auto’ demand here in the U.S., and also elsewhere too. Part of the blame is due to millennials and their reduced driving habits, but a recent run of lukewarm sales reports is also making some believe that the best days are behind the auto industry, at least in the near-term.

And although these issues are definitely a bit of a concern, you’d never know it if you looked at recent trends for some of the key companies in the space. In fact, the auto sector is currently in the top third from a rank perspective, while both domestic and foreign manufacturers have similar ranks too. That is why it might behoove investors to take a closer look at a stock like Toyota Motor ((TM - Free Report) ) right now.

Toyota in Focus

Toyota’s strength stems from its great run in terms of beating earnings estimates—it hasn’t missed since the start of 2016—and the fact that analysts have been raising their estimates for the stock’s earnings potential as of late. In fact, not a single estimate in our consensus has gone lower for either the current quarter, the current year, or next year time frames in the past two months.

Toyota Motor Corp Ltd Ord Price, Consensus and EPS Surprise

Toyota Motor Corp Ltd Ord Price, Consensus and EPS Surprise | Toyota Motor Corp Ltd Ord Quote

Instead, we have seen solid earnings estimate revisions higher, and to a decent magnitude too. The consensus estimate for the current quarter has gained about 5% in the past two months, while the full year estimate has gained nearly 9% in the same time frame. No wonder TM has earned a Zacks Rank #1 (Strong Buy), and why we are bullish on the stock in the near term.


However, it isn’t just the earnings estimate revisions, as Toyota has a great fundamental picture too. The company actually has grades of at least ‘B’ for value and growth, while its VGM (combined) score comes in at an ‘A’ grade too.

As a taste of some of the key factors for its strong grades, consider its double-digit percentage earnings yield, a PE below 10, and a net margin that is greater than the industry average. Additionally, Toyota does not have a grade below a ‘C’ for any of its three key factors (value, growth, or momentum) so it is extremely well-rounded too.

Bottom Line

Worries over a peak auto demand situation seem overblown, and especially when you consider the industry and sector ranks for relevant securities. This is particularly the case for Toyota Motor, as the company has been seeing rising earnings estimates as of late, and is expected to post year-over-year growth too.

Add in strong fundamental factors—really across the board—and it is hard not to like Toyota stock right now. So, if you are looking for a potential pick in the auto world, definitely give this car leader a closer look for your portfolio.


Want more from this author? Make sure to check out his recent podcast which explores the ETF industry and if it is a good investment right now: 

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