U.S. Markets closed

Toyota Declares Share Buyback

Zacks Equity Research

Toyota Motor Corporation (TM) is reportedly repurchasing 1.89% of its shares worth as much as 360 billion yen ($3.5 billion). The automaker also stated that it will be buying back almost half of these proposed 60 million shares by June.

This share repurchase program by Toyota is first in the last five years and is the biggest since 2003. This repurchase strategy is supported by the improved balance sheet at the end of the fiscal 2013 together with higher profit expectations for the year ending Mar 31, 2014.

Toyota had cash and cash equivalents of ¥1,843.4 billion ($18.4 billion) as of Dec 31, 2013, compared with ¥1,718.3 billion ($21.2) as on Mar 31, 2013. In the first nine months of fiscal 2014, operating net cash flow improved to ¥2,727 billion ($27.3 billion) from ¥1,746.2 billion ($21.6 billion) recorded in the year-ago period.

Toyota’s operating income is expected to rise 81.7% year over year to ¥2,400 billion ($24 billion) in fiscal 2014. Net earnings are expected to surge 97.5% to ¥1,900 billion ($19 billion).

Toyota said that it will be selling 30 million shares to Japan Trustee Services Bank for 1 yen per share. The automaker will also be paying dividends which will be used for developing the auto industry and for environmental protection. The remaining 30 million shares will be cancelled. However, the share buyback is subject to approval at the annual general shareholders' meeting.

Toyota also focuses on enhancing sales and production by using the cash balance. Recently, Toyota along with Honda Motor Co., Ltd. (HMC) announced plans to introduce fuel-cell vehicles by 2015. Both the companies intend to produce around 1,000 eco-friendly vehicles per year.

Toyota and Honda’s fuel cell vehicles will provide better mileage compared to the electric vehicles. The initial price of the vehicle is estimated to be around 10 million yen or $97,700.

Toyota’s fuel cell vehicles will target the Japanese, European and U.S market in 2015. The company also plans to increase the annual output to 10,000 vehicles by 2020. In addition, to capture a larger market, Toyota intends to slash prices by about 3–5 million yen or $29,300–$48,900 in 2020.

Currently, Toyota retains a Zacks Rank #2 (Buy).

Some other automobile stocks worth considering are Tata Motors Limited (TTM) and Daimler AG (DDAIF). Both sport a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on HMC
Read the Full Research Report on TM
Read the Full Research Report on DDAIF
Read the Full Research Report on TTM

Zacks Investment Research