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Honda (HMC) Operating Profit Decreases Roughly 40% Y/Y in Q3

Zacks Equity Research

Honda Motor Co., Ltd. HMC has reported operating profit of ¥170.1 billion ($1.51 billion) in the third quarter of fiscal 2019, down 40.2% from the year-ago period. Decreased sales revenues and model mix, along with rise in selling, general and administrative expenses, have led to the slump in operating profit.

In the reported quarter, profit for the period attributable to owners of the parent decreased by 70.5% to ¥168.2 billion ($1.5 billion). Further, earnings per share attributable to owners of the parent were ¥95.61, marking a decline from the year-ago figure of ¥318.50.

Revenues increased 0.4% year over year to ¥3.97 trillion ($35.3 billion). The rise can be attributed to higher sales revenues at motorcycle and financial services businesses, partly offset by effects of the foreign currency translation. The Zacks Consensus Estimate for Honda’s third-quarter fiscal 2019 revenues was $35.3 billion.

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

 

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

Segmental Performance

For the three months ended Dec 31, 2018, revenues from the Automobile segment decreased 1.5% to ¥2.85 trillion ($24.8 billion). During the reported quarter, consolidated unit sales increased 1.1% year over year to 0.94 million.

The Motorcycle segment’s revenues increased 3.5% to ¥499.1 billion ($4.6 billion) and consolidated unit sales increased 4.3% year over year to 3.23 million.

In third-quarter fiscal 2019, the Financial Services segment’s revenues increased 7% to ¥523.6 billion ($5 billion). The revenues of Power Product & Other segment rose 6.5% to ¥85.1 billion ($802.5 million) and consolidated unit sales increased 13% on a year-over-year basis to 1.35 million vehicles.

Financial Position

Consolidated cash and cash equivalents were ¥2.15 trillion ($19.4 billion) as of Dec 31, 2018, up from ¥2.07 trillion ($18.5 billion) as of Mar 31, 2018.

At the end of the first nine months of fiscal 2019, Honda’s net cash from operating activities amounted to ¥498.6 billion ($4.5 billion) compared with the year-ago figure of ¥622.6 billion ($5.6 billion). The decline in the number was due to increased expenses for parts and raw materials, partly offset by cash received from customers.

Dividend Payment

The company announced a quarterly dividend of ¥28 per share for shareholders. For fiscal 2019, total expected annual dividend per share is ¥111.

Guidance

Honda reiterated financial estimates for fiscal 2019 (ending on Mar 31, 2019). At the end of the fiscal year, this Japanese automaker expects revenues to gain 3.2% year over year to ¥15.8 trillion ($142.3 billion). Further, operating income is likely to decrease by 5.2% to ¥790 billion ($7.1 billion). Earnings per share at the end of fiscal 2019 is expected to be ¥393.99.

Zacks Rank & Other Key Picks

Honda currently flaunts a Zacks Rank #1 (Strong Buy). Some other top-ranked stocks in the broader auto sector are General Motors Company GM, Cooper Tire & Rubber Company CTB, and Genuine Parts Company GPC, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

General Motors has an expected long-term growth rate of 8.5%. Share price of the company has increased 16% in the past month.

Cooper Tire has an expected long-term growth rate of 4%. Over the past month, shares of the company have gained 10.1%.

Genuine Parts has an expected long-term growth rate of 5%. Shares of the company have gained 5.3% in the past month.

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