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Toyota (TM) Fortifies US Presence With $749M Investment

Zacks Equity Research

Toyota Motor Corporation TM will invest an additional $749 million at its five hubs in the United States to boost manufacturing footprint in the country. Further, this Japanese automaker reported that it will exceed its investment pledge for the country to reach nearly $13 billion by 2021. In 2017, the company pledged to invest $10 billion over a period of five years. Apart from increasing the company’s manufacturing strength, this $749-million investment will create 600 jobs at its plants in the United States.

The funding amount will be distributed among plants in Kentucky, Alabama, Missouri, Tennessee and West Virginia. The Georgetown, KY-based hub will receive $238 million from the current investment to improve production line. This hub will manufacture Toyota’s best-selling SUVs, Toyota RAV4 hybrid and Lexus ES 300 hybrid. In order to expand its engine production by 2021, the company will invest $288 million at its Huntsville, AL-based plant. Also, for doubling hybrid transaxle capacity and expanding castings at the Jackson, TN-based hub, it will invest $50 million while Troy, MO-based facility will get funding of $62 million for additional castings. In 2021, the West Virginia facility’s investment share of $111 million will be used to double its capacity of hybrid transaxles to 240,000 units per year.

The investment to develop plants in the United States displays Toyota’s commitment to the second-largest vehicle market. The company has been investing to widen presence in the country. Last year, it announced its decision to form a $1.6-billion joint venture with Mazda Motor Corporation to build additional plants in the United States.

Toyota Motor Corporation Price and Consensus


Toyota Motor Corporation Price and Consensus | Toyota Motor Corporation Quote

Per Moody’s, Toyota’s industry-leading position along with its focus to improve products and strengthen operating performance will aid growth. Further, strong balance sheet and sufficient liquidity support the company’s financial flexibility. However, increasing expenses to support research and development of vehicle technology, and foreign currency fluctuations are headwinds for Toyota.

Latest and innovative launches are expected to drive the company’s growth in fiscal 2019. However, softening demand in North America and growing raw material expenses might hamper its performance. For the current fiscal year, this automaker projects net revenues of ¥29.5 trillion and net income of ¥1.87 trillion.

Over the past six months, shares of Toyota have outperformed the industry it belongs to. Shares of the company have lost 5% compared with its industry’s decline of 18.5% during that period.


Zacks Rank & Stocks to Consider

Toyota currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader auto sector are Ferrari N.V. RACE, Oshkosh Corporation OSK and PACCAR Inc. PCAR. Ferrari currently sports a Zacks Rank #1 (Strong Buy) while Oshkosh and PACCAR carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ferrari has an expected long-term growth rate of 18.5%. Over the past three months, shares of the company have gained 28.7%.

Oshkosh has an expected long-term growth rate of 11.3%. Shares of the company have gained 21.3% over the past three months.

PACCAR has an expected long-term growth rate of 10.8%. Shares of the company have gained 23.2% over the past three months.

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