Toyota Beats Estimates, Raises Guidance Conservatively

Toyota reported better-than-expected fiscal Q2 earnings as net income increased 11% to ¥450.9 billion ($3.96B), vs. analyst estimates of ¥444.4B, and revenues rose by a similar amount to ¥6.49T. Strong demand from Asia and Europe helped offset sales declines in North America and its home market. Sales growth was highest in Asia, up 45% to ¥785.2B, followed by an 18% increase in Europe to ¥1T. Toyota said it now expects full-year net income of ¥1.7T, compared to its prior forecast of ¥1.5T. Sales are seen reaching ¥25.5T and operating profit totaling ¥2.3T, from prior estimates of ¥25.0T and ¥2.25T, respectively. Reuters says the estimates lag analyst expectations for net income of ¥1.8T and operating income of ¥2.5T. However, a number of analysts noted Toyota's guidance is typically conservative. "Although the North American market has been slightly underperforming as higher oil prices and the subprime problem hit consumer sentiment, our sales have been moving according to our initial forecast, and Toyota's advantage in the market is unchanged," commented a Toyota executive at a news conference. Toyota also raised its total vehicles sales estimate to 8.93M, from 8.89M previously. The company hiked its interim dividend to ¥65/share, compared to ¥50 last year. Ordinary shares of Toyota gained 0.8% to ¥6,440 ahead of its earnings release. Toyota's ADRs rose 0.3% to $111.99 on Tuesday.

Sources: Press release, Bloomberg, Reuters, Wall Street Journal
Commentary: Toyota Likely to Miss Domestic Sales Target • Nissan's Net Down on Items, But Operating Profit Surprises • Honda "Likely" to Reduce 2007 Sales Forecast
Stocks to watch: TM. Competitors: HMC, NSANY, GM, F. ETFs: EWJ, ITF, ADRA

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Comments

[William L. Florida, CFA]

Can you comment on which suppliers are most likely to benefit?