Honda Motor Beats Q1 Earnings Estimates on Higher Sales
Honda Motor Co., Ltd. (HMC) posted a 19.6% rise in earnings to ¥146.5 billion ($1.44 billion) or ¥81.29 (80 cents) per share in the first quarter (ended Jun 30, 2014) of fiscal 2015 from ¥122.5 billion or ¥67.97 per share in the same quarter of the prior fiscal year. Earnings per share surpassed the Zacks Consensus Estimate by a penny.
Consolidated net sales and other operating revenues grew 5.4% to year over year ¥2.98 trillion ($29.5 billion). However, the figure fell marginally short of the Zacks Consensus Estimate of $29.7 billion. The year-over-year increase can be attributed to higher revenues from the automobile and motorcycle businesses as well as favorable foreign currency translation effects.
Consolidated operating income surged 7.1% to ¥198 billion ($1.95 billion) from ¥184.9 billion in the first quarter of fiscal 2014, driven by cost reduction initiatives and higher sales volume and model mix. The increase was, however, partially offset by increased selling, general and administrative (SG&A) expenses and unfavorable foreign currency effects.
Segment Performance
Revenues in the Automobile segment rose 5.6% to ¥2.3 trillion ($22.9 billion) on a 6.2% rise in consolidated unit sales to 1.1 million vehicles and favorable foreign currency translation effects. Operating profit hiked 3.6% to ¥99.8 billion ($985 million) on cost reduction initiatives and an increase in sales volume and model mix, partially mitigated by increased SG&A expenses.
Revenues in the Motorcycle segment scaled up 2.7% to ¥407.7 billion ($4.02 billion), owing to higher consolidated unit sales, partially hurt by unfavorable foreign currency translation effects. Meanwhile, consolidated unit sales rose 2% to 4.1 million motorcycles. Operating income surged 3.3% to ¥43.9 billion ($434 million) on improved sales volume and model mix, partially impaired by higher SG&A expenses and unfavorable foreign currency translation effects.
Revenues in the Financial Services segment increased 12.9% to ¥186.7 billion ($1.8 billion) on the back of higher revenues from operating leases and favorable foreign currency translation effects. Also, operating income improved 16.1% to ¥51.8 billion ($511 million), attributable to favorable foreign currency effects.
Revenues in the Power Product and Other segment decreased 1.3% to ¥74.2 billion ($732 million) due to lower sales from power product business. Unit sales in the segment went down 5% to 1.5 million. However, the segment recorded operating income of ¥2.3 billion ($24 million), up 75.5% year over year owing to decreased R&D and SG&A expenses.
Financial Position
Consolidated cash and cash equivalents decreased to ¥1.11 trillion as of Jun 30, 2014, from ¥1.17 trillion as of Mar 31, 2014. Total debt amounted to ¥5.84 trillion as of Jun 30, 2014, translating into a debt-to-capitalization ratio of 49.4%, compared with total debt of ¥5.86 trillion and a debt-to-capitalization ratio of 49.7% as of Mar 31, 2014.
In the first quarter of fiscal 2015, cash flow from operations improved to ¥354.7 billion from ¥304.2 billion in the first quarter of fiscal 2014, primarily on higher cash receipts due to better automobile sales, which offset the increase in payments for parts and raw materials. Meanwhile, capital expenditures decreased to ¥194.2 billion from ¥210.7 billion in the first quarter of fiscal 2014.
Guidance
For fiscal 2015, Honda expects revenue to increase 8.1% to ¥12.8 trillion. Operating income is expected to rise 2.6% to ¥770 billion and net income is projected to increase 4.5% to ¥600 billion or ¥332.91 per share.
Currently, shares of Honda retain a Zacks Rank #3 (Hold).
Some better-ranked automobile stocks worth considering include Tower International, Inc. (TOWR), Visteon Corporation (VC) and China Automotive Systems Inc. (CAAS). All these stocks sport a Zacks Rank #1 (Strong Buy).
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Read the Full Research Report on VC
Read the Full Research Report on TOWR
Read the Full Research Report on CAAS
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