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Matsushita (MC-OLD) had a pretty nice quarter in which its y-o-y global sales of PDP and LCD TVs increased by 1.6x to 182.6 billion yen ($1.6b) and its sales of digital cameras doubled to 43.8 billion yen ($376m). Despite revising upward its financial projections for the 1st half, Matsushita may have effectively put a cap on the upside of its shares when it said it would maintain its full year projections based on a "lack of optimism" in the second-half due to the business climates of China and the U.S.

Also, similar to its domestic rivals, Matsushita faces higher raw materials costs that offset forex gains from a "weak" yen.

Matsushita's Q1 Results:

Sales: 2.14 trillion yen ($18.4b), +4%
- Domestic: 1.06 trillion yen ($9.1b), 0%
- Overseas: 1.08 trillion yen ($9.3b), +9%
Operating Profit: 65.1 billion yen ($559m), +41%
Pre-tax Income: 75.4 billion yen ($647m), +14%
Net Income: 35.8 billion yen ($307), +7%

Matsushita's global flat/thin panel TV growth: plasma TV sales +65%, LCD TVs +49%, Europe 2x increase to 54.4 billion yen ($467m), Asia/China 2.3x increase to 21.7 billion yen ($186m), domestic Japan 1.3x increase to 59.7 billion yen ($512m), and the Americas 1.5x increase to 46.8 billion yen ($402m) for an overall increase of 1.6x to 182.6 billion yen ($1.6b).

One obvious area of concern is the 0% growth in domestic sales. Aside from the yen-exchange rate, domestic consumption could be a catalyst that offsets any weakness in overseas markets and potentially pushes Matsushita shares higher. Should Japanese investors react negatively to Matsushita's earnings it might take positive economic data at least out of Japan and neutral or better data out of the U.S. to help Matsushita's shares.

Matsushita raised its projected net income for the first-half to 90 billion yen ($773m, +20% vs. original forecast), sales are expected to be up 2% to 4.34 trillion yen ($37.3b), and pre-tax income up 23% to 190 billion yen ($1.63b).

Per AP-Tokyo, Matsushita's full-year net income is expected to grow 23% y-o-y to 190 billion yen ($1.63b) on a 1% increase in sales to 8.95 trillion yen ($77b).

Radio Nikkei reported that Matsushita attributed World Cup Soccer's impact to be approximately 20 billion yen ($172m). This was close to its expectations but slightly missed targeted revenue. Had the Japanese national team advanced out of the first round the impact most certainly would have been bigger.

Ordinary shares of Matsushita (Tokyo: 6752) closed down 0.43% at 2,315 yen ($19.87). Its ADRs gained 0.55% yesterday closing at $20.05. In intra-day trading its ADRs are trading lower by 0.80% at $19.89.

Click here to access Matsushita's investor relations (financial results) web site.

Click here for Matsushita's Q1 earnings presentation (.pdf).

Click here for Yahoo! Finance/AP coverage of Matsushita's earnings.

Matsushita Electric Industrial (MC-OLD) 1-year chart:

Source: Matsushita's Upside Could Be Limited