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Honda Amends Financials to Reflect Higher Warranty Expenses

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Honda Motor Co., Ltd. (HMC - Free Report) has amended its financial statements for the fourth quarter and fiscal year ended Mar 31, 2015, to reflect the increase in its estimate for product warranty expenses, as announced recently. The company’s earnings now stand at ¥68 billion ($567 million) or ¥37.77 (31 cents) per share for the fourth quarter of fiscal 2015, plunging significantly from ¥170.5 billion ($1.42 billion) or ¥94.61 (79 cents) per share in the year-ago quarter.

Consolidated operating income is restated as ¥67.1 billion ($559 million), down from ¥165.2 billion ($1.37 billion) in the fourth quarter of fiscal 2014, owing to higher selling, general and administrative (SG&A) expenses and lower sales volume and model mix, which were partially offset by favorable currency effects.

Meanwhile, operating loss in the Automobile segment now stands at ¥23.9 billion ($200 million) owing to a decline in sales volume and model mix, along with increased SG&A expenses, including product warranty expense. This was partially offset by favorable foreign currency effects.

Honda’s consolidated earnings per share for fiscal 2015 were modified to ¥273.54 ($2.28), down from ¥318.54 ($2.65) a year ago.

These changes have resulted from Honda’s decision to increase its estimate for product warranty expenses to ¥44.8 billion ($362.81 million) due to an agreement between its supplier, Takata Corp. and the National Highway Traffic Safety Administration (“NHTSA”). The changes will not affect Honda’s financial projections for the fiscal year ending Mar 31, 2016 or the expected total cash dividends for that year.

Honda currently carries a Zacks Rank #4 (Sell). Better-ranked automobile stocks include The Goodyear Tire & Rubber Company (GT - Free Report) , Fox Factory Holding Corp (FOXF - Free Report) and U.S. Auto Parts Network, Inc. (PRTS - Free Report) . Goodyear currently sports a Zacks Rank #1 (Strong Buy), while both Fox Factory Holding and U.S. Auto Parts carry a Zacks Rank #2 (Buy).

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