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Honda After H1'27 Earnings: Buy, Hold or Sell the Stock Now?
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Key Takeaways
Honda's H1 FY27 operating profit jumped 48.1% to 648.7B yen, prompting a higher full-year profit outlook.
Hybrid sales growth, improving auto margins and fading EV-related losses are fueling Honda's recovery.
Strong motorcycle sales and financial services profits support Honda despite China market weakness.
Japanese auto giant Honda Motor (HMC - Free Report) reported a strong first half of fiscal 2027. Sales revenues rose 13.2% to ¥12.04 trillion, and operating profit jumped 48.1% to ¥648.7 billion. Net profit attributable to owners climbed 65.7% to ¥516.8 billion, even after the company absorbed ¥484.8 billion of EV-related losses.
Riding on strong first-half results, management raised its full-year operating profit forecast by ¥130 billion to ¥780 billion. It now expects net profit of ¥500 billion, a sharp turnaround from the ¥424 billion loss in fiscal 2026. With the recovery gathering pace, is HMC stock worth buying now? Let’s dig deeper.
Underlying Profitability Is Recovering Fast
The EV charges grabbed the headlines, but the core business tells a better story. Adjusted operating profit in the automobile segment, which excludes EV-related losses, surged 217.9% to ¥479 billion. The adjusted margin expanded to 6.2% from 2.2%. Higher North American volumes, favorable currency movements and tighter expense control all contributed.
Tariff-related gains of ¥97 billion also helped, partly through one-time refunds. Honda expects total EV-related losses of ¥520 billion this year. Since ¥484.8 billion has already been booked, only about ¥35 billion is left for the second half, which suggests the heaviest part of the clean-up is behind it.
Hybrids Give HMC’s Auto Business a Steady Engine
Demand for fuel-efficient vehicles is lifting the whole industry. Honda’s closest peer, Toyota’s (TM - Free Report) hybrid sales rose 8.3% to 2.45 million units in the first half, and Honda is riding the same wave. Its global hybrid retail sales rose to 494,000 units from 454,000 a year ago. Excluding China, they climbed to 476,000 from 422,000, a gain of nearly 13%.
Honda is also building for the next leg of growth. A new Ohio plant will lift North American capacity from 1.67 million to 1.91 million units by 2029. From that year, the company plans to introduce larger hybrids in the D-segment and above. This extends the hybrid opportunity beyond today’s lineup.
Motorcycles and Financial Services Add Stability
Honda’s two-wheeler franchise remains its profit anchor. Motorcycle sales rose 10.6% to a record 11.9 million units, led by India and Brazil. Operating profit grew 19.2% to ¥439 billion at a margin of 19.3% in the first half of fiscal 2027. That single segment generated about two-thirds of group operating profit.
The company raised its full-year motorcycle volume target to 23.3 million units from 22.8 million. It also plans to lift capacity at its Manaus factory in Brazil from 1.6 million to 2.3 million units by 2029.
Financial Services segment is also going strong. Segment revenues grew 20.9% to ¥2.03 trillion, and operating profit rose 47.3% to ¥210.9 billion. The margin improved to 10.4% from 8.5%. Second-quarter profit alone reached ¥105.1 billion, against ¥58.2 billion a year earlier. This is a clear contrast with Toyota, whose financial services profit slipped 13.8% in its latest quarter. For Honda, this recurring income cushions the auto business while it restructures.
Challenges in Honda’s Path
Honda’s sales in China remain weak. First-half automobile volumes fell 6.6% to 1.57 million units. Honda trimmed its full-year auto sales forecast by 230,000 units to 3.16 million because of weakness in China. Capital spending is also rising, with the full-year plan lifted to ¥1.4 trillion. Favorable currency effects, which added ¥148.3 billion to adjusted operating profit, may not repeat at the same scale.
However, these are mostly conditions Honda can manage. The higher spending funds capacity in its strongest businesses, and Honda still holds ¥5.5 trillion in cash. Management has already built these risks into a forecast it just raised.
What Do Estimates Say for Honda?
The Zacks Consensus Estimate for HMC’s fiscal 2027 EPS has moved up by 3 cents over the past 30 days to $2.32, implying 210% growth year over year. The consensus mark for fiscal 2028 EPS has increased by 4 cents over the past 30 days to $3.67, implying growth of 58.5% from the projected fiscal 2027 EPS.
Image Source: Zacks Investment Research
Our Take
Honda’s first half shows a company fixing its biggest problem while its strengths keep growing. The EV clean-up is nearly done, hybrids are gaining ground in North America, motorcycles are setting records, and financial services is contributing more each quarter.
For investors with a longer horizon, Honda offers an auto business with improving margins, a world-class motorcycle franchise and a growing financing arm. We think HMC is a buy after its fiscal first-half results.
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Honda After H1'27 Earnings: Buy, Hold or Sell the Stock Now?
Key Takeaways
Japanese auto giant Honda Motor (HMC - Free Report) reported a strong first half of fiscal 2027. Sales revenues rose 13.2% to ¥12.04 trillion, and operating profit jumped 48.1% to ¥648.7 billion. Net profit attributable to owners climbed 65.7% to ¥516.8 billion, even after the company absorbed ¥484.8 billion of EV-related losses.
Riding on strong first-half results, management raised its full-year operating profit forecast by ¥130 billion to ¥780 billion. It now expects net profit of ¥500 billion, a sharp turnaround from the ¥424 billion loss in fiscal 2026. With the recovery gathering pace, is HMC stock worth buying now? Let’s dig deeper.
Underlying Profitability Is Recovering Fast
The EV charges grabbed the headlines, but the core business tells a better story. Adjusted operating profit in the automobile segment, which excludes EV-related losses, surged 217.9% to ¥479 billion. The adjusted margin expanded to 6.2% from 2.2%. Higher North American volumes, favorable currency movements and tighter expense control all contributed.
Tariff-related gains of ¥97 billion also helped, partly through one-time refunds. Honda expects total EV-related losses of ¥520 billion this year. Since ¥484.8 billion has already been booked, only about ¥35 billion is left for the second half, which suggests the heaviest part of the clean-up is behind it.
Hybrids Give HMC’s Auto Business a Steady Engine
Demand for fuel-efficient vehicles is lifting the whole industry. Honda’s closest peer, Toyota’s (TM - Free Report) hybrid sales rose 8.3% to 2.45 million units in the first half, and Honda is riding the same wave. Its global hybrid retail sales rose to 494,000 units from 454,000 a year ago. Excluding China, they climbed to 476,000 from 422,000, a gain of nearly 13%.
Honda is also building for the next leg of growth. A new Ohio plant will lift North American capacity from 1.67 million to 1.91 million units by 2029. From that year, the company plans to introduce larger hybrids in the D-segment and above. This extends the hybrid opportunity beyond today’s lineup.
Motorcycles and Financial Services Add Stability
Honda’s two-wheeler franchise remains its profit anchor. Motorcycle sales rose 10.6% to a record 11.9 million units, led by India and Brazil. Operating profit grew 19.2% to ¥439 billion at a margin of 19.3% in the first half of fiscal 2027. That single segment generated about two-thirds of group operating profit.
The company raised its full-year motorcycle volume target to 23.3 million units from 22.8 million. It also plans to lift capacity at its Manaus factory in Brazil from 1.6 million to 2.3 million units by 2029.
Financial Services segment is also going strong. Segment revenues grew 20.9% to ¥2.03 trillion, and operating profit rose 47.3% to ¥210.9 billion. The margin improved to 10.4% from 8.5%. Second-quarter profit alone reached ¥105.1 billion, against ¥58.2 billion a year earlier. This is a clear contrast with Toyota, whose financial services profit slipped 13.8% in its latest quarter. For Honda, this recurring income cushions the auto business while it restructures.
Challenges in Honda’s Path
Honda’s sales in China remain weak. First-half automobile volumes fell 6.6% to 1.57 million units. Honda trimmed its full-year auto sales forecast by 230,000 units to 3.16 million because of weakness in China. Capital spending is also rising, with the full-year plan lifted to ¥1.4 trillion. Favorable currency effects, which added ¥148.3 billion to adjusted operating profit, may not repeat at the same scale.
However, these are mostly conditions Honda can manage. The higher spending funds capacity in its strongest businesses, and Honda still holds ¥5.5 trillion in cash. Management has already built these risks into a forecast it just raised.
What Do Estimates Say for Honda?
The Zacks Consensus Estimate for HMC’s fiscal 2027 EPS has moved up by 3 cents over the past 30 days to $2.32, implying 210% growth year over year. The consensus mark for fiscal 2028 EPS has increased by 4 cents over the past 30 days to $3.67, implying growth of 58.5% from the projected fiscal 2027 EPS.
Our Take
Honda’s first half shows a company fixing its biggest problem while its strengths keep growing. The EV clean-up is nearly done, hybrids are gaining ground in North America, motorcycles are setting records, and financial services is contributing more each quarter.
For investors with a longer horizon, Honda offers an auto business with improving margins, a world-class motorcycle franchise and a growing financing arm. We think HMC is a buy after its fiscal first-half results.
HMC currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.