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Honda (HMC) to Release Q4 Earnings: What's in the Cards?

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Honda Motor Company HMC is expected to report fourth-quarter fiscal 2018 (ended Mar 31, 2018) results on Apr 27. Last quarter, the company delivered a positive surprise of 42.3%. In fact, Honda surpassed expectations in each of the trailing four quarters with an average beat of 66.7%.

Honda has expected long-term growth rate of 4.8%. In the last six months, shares of Honda have outperformed the industry it belongs to. The stock has returned 10.9% compared with the industry’s gain of 3.5% during the period.

Let’s see, how things are shaping up for this announcement.

Honda Motor Co., Ltd. Price and EPS Surprise

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

Factors Influencing This Quarter

For fiscal 2018 (ending Mar 31, 2018), Honda expects revenues to improve 8.6% to ¥15.2 trillion. Honda’s financial position strengthened in fiscal 2017. This continued through fiscal 2018 as well.

Per Honda’s updated Vision 2030 strategy plan, it has been focusing on developing electric vehicles (EVs), self-driving vehicles, plug-in hybrid as well as hydrogen fuel cell vehicles. Honda is also focusing on coordinating research and development as well as procuring and manufacturing products, with an aim to reduce development costs as part of its Vision 2030 strategy plan.

However, frequent vehicle recalls over the past few years have been hitting customers’ confidence in the company while increasing its expenses.

Earnings Whispers

Our proven model does not conclusively show that Honda is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a solid Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here, as you will see below.

Zacks ESP: Honda has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 46 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Honda carries a Zacks Rank #2, which increases the predictive power of ESP. However, its 0.00% ESP makes surprise prediction difficult.

We caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks to Consider

Here are a few stocks worth considering from the same space, with the right combination of elements to outpace earnings estimates this time around:

BorgWarner Inc. BWA has an Earnings ESP of +0.83% and a Zacks Rank #2. Its first-quarter 2018 results are expected to be released on Apr 26. You can see the complete list of today’s Zacks #1 Rank stocks here.

American Axle & Manufacturing Holdings, Inc. AXL has an Earnings ESP of +3.45% and a Zacks Rank of 3. It is expected to report first-quarter 2018 results on May 4.

Cummins Inc. CMI has an Earnings ESP of +0.48% and is a #3 Ranked player. Its first-quarter 2018 results are slated to be announced on May 1.

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