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Honda (HMC) to Post Q3 Earnings: What's in the Cards?

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Honda HMC is slated to release third-quarter fiscal 2021 results on Feb 9. The Zacks Consensus Estimate for the quarter’s earnings is pegged at 75 cents per share on revenues of $35.27 billion.

This Japanese auto giant delivered higher-than-anticipated earnings in the last reported quarter on solid revenues from the Financial Services & Life Creation and Other Business segments.

Over the trailing four quarters, the company surpassed estimates on two occasions for as many misses, the average negative surprise being 1.43%. This is depicted in the graph below:

Honda Motor Co., Ltd. Price and EPS Surprise

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 third-quarter earnings per share moved five cents north to 75 cents in the past 30 days. Moreover, this compares favorably with the year-ago quarter’s earnings of 61 cents per share, indicating a 22.95% jump, year on year. The Zacks Consensus Estimate for quarterly revenues also suggests a year-over-year rise of 2.31%.

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 currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Key Factors

The auto industry is influenced by many strong macroeconomic factors and is highly sensitive to overall strength of the economy. With the economy in an unhealthy state and new Covid-19 strains prolonging the second wave of infections, customers are likely to have put discretionary expenses on hold. Consequently, the quarterly performance of Honda might have been adversely impacted.

This is reflected by a decline in Honda’s vehicles sales in the American market on a yearly basis. Total vehicle sales in the said market summed 366,068 vehicles during the quarter to be reported, down 8.9% year on year.

Also, the company’s elevated capital expenditure on advanced technologies and alternative fuels for the development of electric and autonomous vehicles are likely to have dented the fiscal third-quarter margins. Additional costs associated with vehicle recalls during the fiscal third quarter to fix software defects and faulty drive shafts are also likely to have hurt the firm’s performance.

Nonetheless, for the quarter in discussion, the vehicle sales in Japanese market summed 150,434 units, higher than the 122,182 units sold in the prior-year quarter, which is likely to have provided some respite to the automaker’s quarterly results.

Stocks to Consider

Here are a few stocks worth considering, as these have the right combination of elements to come up with an earnings beat this time around:

BorgWarner BWA has an Earnings ESP of +2.94% and carries a Zacks Rank #3, currently. The company is scheduled to report quarterly numbers on Feb 11.

Allison Transmission Holdings ALSN has an Earnings ESP of +7.44% and carries a Zacks Rank #3 at present. The company will announce fourth-quarter 2020 results on Feb 17.

Magna International MGA has an Earnings ESP of +5.42% and currently flaunts a Zacks Rank of 1. The company is slated to release earnings numbers on Feb 19.

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