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Toyota's (TM) Cost-Cut Moves Drive Operating Income in Q2

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Toyota Motor Corporation’s (TM - Free Report) operating income rose 11% to ¥579.1 billion ($5.2 billion) in second-quarter fiscal 2019 (ended Sep 30, 2018). The rise was due to marketing activities and cost reduction initiatives. Further, this Japanese automaker reported net income of ¥585 billion ($5.3 billion) in the quarter under review, up 28% from the year-ago period.

Consolidated revenues increased to ¥7.3 trillion ($65.9 billion) compared with ¥7.1 trillion ($64.4 billion) recorded in the prior-year quarter. The Zacks Consensus Estimate was $66.8 billion.

In the first six months of fiscal 2019, consolidated vehicle sales went up to 4,418,928 units globally, marking an increase of 29,493 units compared with the same period of the last year.

Toyota Motor Corporation Price, Consensus and EPS Surprise

 

Segmental Results

All figures mentioned below are U.S. GAAP-based.

The Automotive segment’s net revenues rose to ¥6.5 trillion ($58.7 billion) in second-quarter fiscal 2019 in comparison with ¥6.4 trillion ($57.4 billion) in the prior-year quarter. Operating income increased to ¥462 billion ($4.2 billion) from the year-ago figure of ¥423billion ($3.8 billion).

The Financial Services segment’s net revenues rose to ¥534billion ($4.8 billion) in the quarter under review compared with ¥494 billion ($4.4 billion) in the prior-year period. Operating income increased to ¥81 billion ($733 million) from the year-earlier figure of ¥69 billion ($625 million).

All Other businesses’ net segmental revenues declined to ¥412 billion ($3.7 billion) in the quarter under discussion compared with ¥431 billion ($3.9 billion) in the last year. Operating income increased to ¥29 billion ($264 million) from the year-ago tally of ¥23 billion ($205 million).

Financial Position

Toyota had cash and cash equivalents of ¥3.2 trillion ($29.5 billion) as of Sep 30, 2018, compared with ¥3.1 trillion ($27.5 billion) as of Mar 31, 2018. Long-term debt amounted to ¥11.1 trillion ($101 billion) as of Jun 30, 2018, compared with ¥10 trillion ($90 billion) as of Mar 31, 2018.

At the end of the first half of fiscal 2019, operating cash flow was ¥1.8trillion ($17 billion) compared with ¥2 trillion ($18 billion) registered on the same period of fiscal 2018.

Dividend & Share Repurchase

Toyota announced that its board members approved an interim dividend of ¥100 per common share.

Further, the company announced that it will buy back 2.4 trillion shares worth around ¥250 billion.

Fiscal 2019 Guidance

Toyota reiterated its total consolidated vehicle sales expectation for fiscal 2019 to be roughly 8.9 million units. However, the company projects net revenues at ¥29.5 trillion ($268.2 billion).The prior expectation was of ¥29 trillion. Operating income is anticipated to be ¥2.4 trillion ($21.8 billion) compared with ¥2.3 trillion mentioned previously. Further, net income is anticipated to be ¥2.3 trillion ($21 billion), marking an increase from ¥2.12 trillion projected earlier.

Zacks Rank & Key Picks

Toyota currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the auto space are PACCAR Inc. (PCAR - Free Report) , Cooper Tire & Rubber Company (CTB - Free Report) , and Fox Factory Holding Corporation (FOXF - Free Report) . PACCAR and Cooper Tire carry a Zacks Rank #2 (Buy) while Fox Factory sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PACCAR has an expected long-term growth rate of 10.8%. The company’s stock has seen the Zacks Consensus Estimate for fourth-quarter 2018 earnings being revised 4.7% upward over the past 30 days.

Cooper Tire has an expected long-term growth rate of 4%. The company’s stock has seen the Zacks Consensus Estimate for fourth-quarter 2018 earnings being revised 5.9% upward over the past sevendays.

Fox Factory has an expected long-term growth rate of 16.8%. The company’s stock has seen the Zacks Consensus Estimate for fourth-quarter 2018 earnings being revised 9.8% upward over the past sevendays.

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