Back to top

Image: Bigstock

Honda (HMC) Lags Q3 Earnings & Sales Estimates, Ups View

Read MoreHide Full Article

Honda Motor HMC reported fiscal third-quarter 2020 results on Feb 7. Earnings and revenues of the firm missed the Zacks Consensus Estimate, and declined from the year-ago quarter. Weaker contribution from ‘Automobile’ and ‘Life Creation and Other Business’ segments, along with unfavorable foreign currency translations resulted in tepid results. On Feb 6, Japan’s #1 automaker Toyota TM released fiscal third-quarter 2020 results, wherein earnings topped estimates and improved from the year-ago figure.

Honda posted earnings of 61 cents per ADR, lagging the Zacks Consensus Estimate of 69 cents and decreasing from the year-ago earnings of 85 cents. The firm reported revenues of $34,470 million, missing the Zacks Consensus Estimate of $34,606 million and declining from the prior-year sales of $35,250 million.

Honda Motor Co., Ltd. Price, Consensus and EPS Surprise


Honda Motor Co., Ltd. Price, Consensus and EPS Surprise

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

Segmental Highlights

For the three months ended Dec 31, 2019, revenues from the Automobile segment declined 9.9% year over year to ¥2.57 trillion ($23.7 billion) amid lower sales in Japan, the United States and China. Consequently, the unit’s operating profit decreased 18.2% from the corresponding period of 2018 to ¥33.7 billion ($310 million). Lower sales and negative foreign currency translations more than offset the benefits of cost-cut initiatives.

Revenues from the Motorcycle segment came in at ¥530.2 billion ($4.9 billion), up 2.7% year over year. Higher sales units in China, Thailand and Brazil resulted in improved sales, partly offset by lower sales in India. The unit’s operating profit increased 7.2% from the comparable year-ago period to ¥74.5 billion ($685 million). Higher overall sales and decreased SG&A expenses aided the results.

Revenues from the Financial Services segment totaled ¥619.8 billion ($5.7 billion), up 9.8% year over year. The unit’s operating profit also increased 6.9% year over year to ¥64.6 billion ($594.2 million) on higher leasing revenues.

Revenues from the Life Creation and Other Business came in at ¥86.4 billion (794.4 million), down 13.1% year over year. The segment incurred operating loss of ¥6,184 million ($0.056 million), which widened from the loss of ¥992 million in the corresponding quarter of the prior year amid weaker sales of products in the United States.

Dividend & Financial Position

The company announced a quarterly dividend of ¥28 per share for its shareholders. For fiscal 2020, total annual dividend payment per share is expected to be ¥112.

Consolidated cash and cash equivalents were ¥2.44 trillion ($22.2 billion) as of Dec 31, 2019. Long-term debt was ¥4.2 trillion ($38 billion), representing a debt-to-capital ratio of 32.3%.

Guidance Up

Amid expectation of weaker yen and cost-control efforts, Honda increased its sales and operating profit view for fiscal 2020 (ending Mar 31, 2020).

This Japanese automaker expects revenues to be ¥15.15 trillion at the end of fiscal 2020, indicating a 4.6% year-over-year decline. However, the updated projection compares favorably with the prior guidance of ¥15 trillion. Further, operating income is now projected at ¥730 billion compared with the previous forecast of ¥690 billion. The estimated figure suggests 0.5% year-over-year growth. Operating margin is now anticipated to be 4.8%, upfrom the prior projection of 4.6%. Earnings per share at the end of fiscal 2020 are expected to be ¥339.64, up from the prior view of ¥329.64.

Zacks Rank & Stocks to Consider

Honda currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the Auto-Tires-Trucks sector are Gentex Corporation (GNTX - Free Report) and SPX Corporation SPXC, each carrying a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Gentex has an estimated earnings growth rate of 6% for fiscal 2020.

SPX has an expected earnings growth rate of 8.1% for fiscal 2020.

The Hottest Tech Mega-Trend of All

Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>

Go Deeper With Exclusive Zacks Research

Normally $25 each - click below to receive one report FREE:

Gentex Corporation (GNTX) - free report >>