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Key Factors Shaping the Fate of Honda's (HMC) Q2 Earnings

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Honda (HMC - Free Report) is slated to release second-quarter fiscal 2021 results on Nov 5. The Zacks Consensus Estimate for the quarter’s earnings is pegged at 74 cents per share on revenues of $31.19 billion.

This Japanese auto giant delivered higher-than-anticipated earnings in the last reported quarter.

Over the trailing four quarters, the company surpassed estimates on all occasions, the average surprise being 117.02%.

Honda Motor Co., Ltd. Price and EPS Surprise

Honda Motor Co., Ltd. Price and EPS Surprise

Honda Motor Co., Ltd. price-eps-surprise | Honda Motor Co., Ltd. Quote

Trend in Estimate Revisions   

The Zacks Consensus Estimate for Honda’s fiscal second-quarter earnings per share moved down 3 cents to 74 cents in the past 30 days. Also, this compares unfavorably with the year-ago quarter’s earnings of $1.31 cents per share, indicating a 43.51% decline, year on year. The Zacks Consensus Estimate for the quarterly revenues also suggests a year-over-year fall of 9.36%.

Earnings Whispers

Our proven Zacks model does not conclusively predict an earnings beat for Honda this time around. The combination of a positive Earnings ESP, and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), increases the odds of an earnings beat. However, that is not the case here as elaborated below.

Earnings ESP: Honda has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate is at par with the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Honda, peers of which include Toyota (TM - Free Report) , Nissan Motor (NSANY - Free Report) and Volkswagen AG (VWAGY - Free Report) , currently carries a Zacks Rank of 5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Key Factors

The auto industry is influenced by a number of strong macroeconomic factors and is highly sensitive to the overall strength of the economy. Currently, the auto sector is battling the global semiconductor supply deficit, which is forcing automakers to idle production lines across the world. This is expected to have adversely impacted Honda’s fiscal second-quarter performance.

Evidently, for the quarter in discussion, Honda’s vehicle sales in the Japanese market summed 132,885 units, lower than the 155,491 units sold in the prior-year quarter, which is likely to have hurt the automaker’s quarterly results.

For the September-end quarter, Honda’s sales in the United States totaled 345,914 units, shrinking 10.9% from the third quarter of 2020, with the firm’s namesake and Acura brands witnessing a year-over-year drop of 2.8% and 11.9%, respectively.

Thus, declining vehicle sales in Japan and the United States are likely to have dented Honda’s quarterly performance during the July-September period.

Moreover, the company’s elevated capital expenditure on advanced technologies and alternative fuels for the development of electric and autonomous vehicles might have limited its fiscal second-quarter margins.