Canon Reports Q4 Earnings -- Net Income Up 34% Sets New Record (CAJ)

Canon (CAJ) reported 4th quarter earnings and year 2005 results after the Tokyo Stock Exchange closed today. Fourth quarter net income of 108.2 billion yen (US$921.7 million) set a new record and was an increase of 33.9% y-o-y exceeding its earlier projection by 0.1%. Reuters reported that Canon forecast a seventh straight year of record profit in 2006 based on strong sales of digital cameras and a weaker yen. Fourth quarter financial results as well as 2006 projections are summarized below. Note than earnings per share in US$ was lower y-o-y due to a weaker yen despite a 10.1% increase in yen denominated EPS.

Canon reported the following summary of Q4 financial results*:

    • Net Sales: 1,119.8 billion yen (US$9.54b, +14.1% y-o-y, +1.3% above projection)
    • Gross Profit: 539.2 billion yen (US$4.59, +12.8% y-o-y, -0.9% under projection)
    • Operating Profit: 169.3 billion yen (US$1.44b, +28.1% y-o-y, -2.3% under projection)
    • Net Income: 108.2 billion yen ($921.7m, +33.9% y-o-y, +0.1% above projection)

Canon earned $0.89 per share in the fourth quarter, a 16% decline y-o-y due to a weaker yen versus the dollar. Canon is forecasting a 9.8% increase in EPS (basic) in 2006 to 467.55 yen per share versus the 432.94 yen per share ($3.67 for both basic and diluted) earned in 2005. This is slightly lower than the 10.1% increase over the prior year in years 2004 and 2005. The $3.67 EPS for 2005 is $0.10 lower than 2004, once again due to a weaker yen.

Canon experienced a 45 billion yen (US$383 million) foreign exchange profit after subtracting FOREX impact on costs from sales.

Full year 2005 financial results y-o-y versus earlier projections:

    • Net Sales: +8.3% y-o-y, +0.4% above projection
    • Gross Profit: +6.2% y-o-y, -0.3% under projection
    • Operating Profit: +7.2% y-o-y, -0.7% under projection
    • Net Income: +11.9% y-o-y, 0.0% against projection

Canon's 2006 projections versus 2005 actual results:

    • Net Sales: 4,060 billion yen, +8.1%
    • Gross Profit: 1,996 billion yen, +9.7%
    • Operating Profit: 653 billion yen, +12.0%
    • Net Income: 415 billion yen, +8.0%
    • Foreign exchange rate Yen-1USD: 115.00 vs. 110.58 '05 actual

Canon's 1Q-06 projections versus 1Q-05 actual results:

    • Net Sales: 900 billion yen, +6.7%
    • Gross Profit: 439 billion yen, +7.2%
    • Operating Profit: 153 billion yen, +6.8%
    • Net Income: 98 billion yen, +5.3%
    • Foreign exchange rate Yen-1USD: 115.00 vs. 104.58 1Q-05 actual

For more details of Canon's quarterly and annual financial performance in addition to business segment results, see this link.

* Canon listed a conversion rate of Y117.39/US$1 for its Q4-2005 financial results.

Canon ended the day up 0.42% to close at 7,190 yen (US$61.16 at last posted conversion rate of Y117.56/US$1) in Tokyo ahead of its earnings release after the market closed. Canon's ADRs (CAJ) closed Friday at $61.68. Its 52-wk high is $63.92.

CAJ 1-yr chart:

Comments

[Steven Towns:]

Tom, use this link (click here) to find CAJ's annual EPS (basic and diluted in yen and dollars). I subtracted the full year EPS from the YTD EPS (data from MSN Money) to arrive at quarterly EPS. Canon did not report quarterly EPS in its materials. I have seen different quarterly EPS numbers reported at different web sites and assume the discrepancies are based on the currency conversion rate used. Also some sites are still showing the EPS (TTM) as of Q3, not Q4. By the way, the number of shares outstanding are 888,742,779.

2006 Jan 31 12:24 AM

[Steven Towns:]

For instance, I have no idea where S&P (see this link and pasted text below) is getting its Q4 2005 (period ended December) EPS numbers.



<blockquote><... (CAJ) : Ups to 5 STARS (strong buy) from 3 STARS (hold)
Analyst: Megan Graham-Hackett

December quarter EPS of US$1.08 vs 81 cents is above our $1.07 estimate, driven by new models of digital still cameras and inkjet printers released right before holiday season. We expect Canon to continue to leverage its market position in digital still cameras, copiers and printers, and to override price pressure through proactive cost reductions and product mix. We are raising our 2006 earning per American Depositary Shares estimate to $4.41 from $3.78, and see $5.07 for 2007, on improved margin. Our 12-month target price rises to $80 from $63.</blockquote>...

2006 Jan 31 12:56 AM