U.S. Markets closed

Honda's (HMC) Q4 Earnings, Revenues Miss Estimates - Analyst Blog

Zacks Equity Research

Honda Motor Co., Ltd. HMC reported a 42.6% decrease in earnings to ¥97.8 billion ($814 million) or ¥54.29 (45 cents) per share in the fourth quarter (ended Mar 31, 2015) of fiscal 2015 from ¥170.5 billion ($1.42 billion) or ¥94.61 (79 cents) per share in the year-ago quarter. Further, earnings per share missed the Zacks Consensus Estimate of 59 cents.

Consolidated net sales and other operating revenues went up 8.3% year over year to ¥3.35 trillion ($27.91 billion). However, the figure fell marginally short of the Zacks Consensus Estimate of $27.98 billion. The year-over-year increase can be attributed to higher revenues from motorcycle business operations, as well as favorable foreign currency translation effects, which offset the decline in revenues in automobile business operations.

Consolidated operating income fell 32.3% year over year to ¥111.9 billion ($932 million) from ¥165.2 billion ($1.37 billion) in the fourth quarter of fiscal 2014, owing to higher selling, general and administrative (SG&A) expenses and lower sales volume and model mix, which were partially offset by favorable currency effects.

Fiscal 2015 Performance

Honda’s consolidated earnings per share declined 8.9% year over year to ¥290.06 ($2.41) from ¥318.54 ($2.65) a year ago. Moreover, earnings per share missed the Zacks Consensus Estimate of $2.55.

Revenues for fiscal 2015 increased 6.8% to roughly ¥12.65 trillion ($105.24 billion) from ¥11.84 trillion ($98.5 billion) in fiscal 2014. However, the figure fell short of the Zacks Consensus Estimate of $105.48 billion. The year-over-year upside was driven by increased revenues from motorcycle business operations as well as favorable foreign currency translation effects.

Segment Performance

Revenues in the Automobile segment rose 6.2% to ¥2.5 trillion ($21 billion) on favorable foreign currency translation effects, partially offset by a 1.9% decrease in consolidated unit sales to 915 thousand vehicles. Meanwhile, operating profit decreased 71.5% to ¥20.8 billion ($173 million) on a decline in sales volume and model mix, along with increased SG&A expenses, including product warranty expense. This was partially offset by favorable foreign currency effects.

Revenues in the Motorcycle segment scaled up 14.7% to ¥514.5 billion ($4.3 billion), on higher consolidated unit sales and favorable foreign currency translation effects. Consolidated unit sales rose 1.8% to 2.8 million motorcycles. Operating income increased 6.2% to ¥45.6 billion ($380 million) on increased sales volume and model mix, and favorable foreign currency effects, which offset the increase in SG&A expenses.

Revenues in the Financial Services segment increased 17.9% to ¥221.3 billion ($1.8 billion) on the back of higher revenues from operating leases and favorable foreign currency translation effects. Also, operating income improved 2.5% to ¥50 billion ($416 million), attributable to positive foreign currency effects, which offset the increase in costs related to lease residual values.

Revenues in the Power Product and Other segment stood at ¥93 billion ($774 million), up 12.5% from the year-ago level. The increase was driven by higher consolidated power product unit sales and favorable foreign currency translation effects. Unit sales in the segment went up 3.4% to 2.1 million. The segment’s operating loss reduced to ¥4.5 billion ($38 million) from ¥9.5 billion ($80 million) in the year-ago quarter, attributable to unfavorable currency effects and higher expenses in other businesses.
 
Financial Position

Consolidated cash and cash equivalents increased to ¥1.47 trillion ($12.2 billion) as of Mar 31, 2015, from ¥1.17 trillion ($9.73 billion) as of Mar 31, 2014. Total debt amounted to ¥6.79 trillion ($56.5 billion) as of Mar 31, 2015, translating into a debt-to-capitalization ratio of 50.2%, compared with total debt of ¥5.86 trillion ($48.74 billion) and a debt-to-capitalization ratio of 49.7% as of Mar 31, 2014.

In fiscal 2015, cash flow from operations increased to ¥1.42 trillion ($11.8 billion) from ¥1.23 trillion ($10.23 billion) in fiscal 2014. This came on the back of an increase in cash received from customers, driven by higher unit sales, partially offset by increased payments for parts and raw materials. Meanwhile, capital expenditures contracted to ¥722.7 billion ($6.01 billion) in fiscal 2015 from ¥774 billion ($6.44 billion) in fiscal 2014.

Guidance

For fiscal 2016, Honda expects revenues to increase 9.5% to ¥13.85 trillion ($120.4 billion). Operating income is likely to increase 1.3% to ¥660 billion ($5.74 billion). Net income is projected to inch up 0.4% to ¥525 billion ($4.57 billion) or ¥291.30 ($2.53) per share.

Currently, Honda carries a Zacks Rank #4 (Sell). Better-ranked automobile stocks include Gentherm Inc. THRM, Allison Transmission Holdings, Inc. ALSN and General Motors Company GM. Allison Transmission sports a Zacks Rank #1 (Strong Buy), while both Gentherm and General Motors carry a Zacks Rank #2 (Buy).


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
HONDA MOTOR (HMC): Free Stock Analysis Report
 
GENERAL MOTORS (GM): Free Stock Analysis Report
 
ALLISON TRANSMN (ALSN): Free Stock Analysis Report
 
GENTHERM INC (THRM): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research