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Toyota (TM) Initiates Recall to Address Manufacturing Issue (Revised)

Zacks Equity Research

In an attempt to fix a manufacturing issue, Toyota Motor Corporation TM has announced the recall of certain models of its Prius c vehicles.
The recall is intended to address a specific manufacturing issue affecting the DC-DC converter in approximately 500 vehicles in the United States.  According to the company, the recall is not related to earlier Prius recalls.

Toyota stated that it is committed to the safety and security of its customers and has acted promptly to address the identified issues.

Coming to price performance, Toyota’s shares have gained 1.9% over the past six months against the industry’s loss of 2.1%.

Frequent recalls not only affect a company’s reputation, but also result in significant expenses and lower vehicle resale value. In April 2019, Toyota recalled approximately 43,000 units of 2015-2017 Toyota Yaris, which had probabilities of a wiring problem related to the airbag system. In January, the company had recalled 1.7 million vehicles to fix the faulty Takata airbag inflators. The recall consisted vehicles of the model year 2010 through 2015. In November and October 2018, the company recalled one million combustion vehicles and 2.43 million gasoline hybrid vehicles, respectively.

Over the years, Toyota has paid several large fines related to safety defects in some of its vehicles as well as to settle lawsuits. In May 2017, it agreed to pay $553 million related to a Takata-recall settlement. Prior to this, in November 2016, the automaker agreed to settle a U.S. truck lawsuit by paying roughly $3.4 billion. The lawsuit filed by U.S. pickup truck and SUV owners claimed that the vehicles did not have enough rust protection. Frequent vehicle recalls are concerns for Toyota.

Toyota Motor Corporation Price and Consensus

Toyota Motor Corporation Price and Consensus

Toyota Motor Corporation price-consensus-chart | Toyota Motor Corporation Quote

Zacks Rank & Stocks to Consider

Toyota currently carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the auto space are PACCAR Inc PCAR, CarMax, Inc KMX and AutoZone, Inc AZO, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

PACCAR has an expected long-term growth rate of 8.4%. Shares of the company have gained 20.6% in six months’ time.

CarMax has a projected long-term growth rate of 12.6%. In the past six months, the stock has surged 36%.

AutoZone has an estimated long-term growth rate of 12.2%. Over the past six months, shares of the company have rallied 38.3%.

(We are reissuing this article to correct a mistake. The original article, issued on Jul 4, 2019, should no longer be relied upon.)

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