In the past few years, the economic crisis has dramatically reduced the number of cars purchased in the U.S. This year, vehicle purchases are rebounding nicely and are currently projected to top 14 million units. Toyota , currently the number two auto manufacturer in the world, lost its number one status to General Motors (NYSE:GM) during last year's earthquake and tsunami off the coast of Japan. Honda sales were also adversely affected. However, things are definitely looking up. So which company is the better buy now?
In my analysis, I tend to rely heavily on analyst opinion and estimates. I figure they have been studying the stock for a while and probably have a better handle on the numbers than I do. I do look at current news, as well, but I like to lean more on the numbers to provide an objective recommendation.
Honda is currently trading at about $31, off its 52-week high of $41.23 reached last summer. It has a PE of 20.4 and pays a 2.3% dividend. The current analyst rating is a 1.5 (1.0 = Strong Buy, 5.0 = Sell) with a mean target price of $43.96. There are only two analysts who cover this stock: 1 Strong Buy recommendations and 1 Buy.
The 3/2012 consensus earnings estimate is $1.61, which is 53% lower than the actual 3/2011 earnings of $3.45. The estimate for 3/2013 is $3.74, 132% higher than 2012.
The stock is at break-even year to date, and down 18% from this time last year. The current estimated annual growth rate for the next five years is 34.90%, compared with an industry average of 14.10% and a sector average of 15.47%.
Toyota is trading at approximately $75 per share, off its 52-week high of $87.15, reached in April. It has a PE of 32.4 and pays a dividend of 1.3%. Currently analysts rate it a 2.7, and only three analysts cover this stock: 0 Strong Buys, 1 Buy, and 2 Holds) with a mean target price of $62.90.
Toyota's fiscal-year 3/2013 consensus earnings estimate is $6.85, 138% higher than actual 2012 earnings. Its estimate for 3/14 is $7.88, 15% higher than 2013.
The stock is up 13% since the beginning of 2012, but down 8% from a year ago. Current five-year annual growth is estimated at 34.55% vs the S&P at 10.41%.
With Honda's current PE and 3/2013 earnings estimate, I see a stock price of $75, or upside of 140%, for March 2013. Toyota's PE and earnings estimate leads to a stock price of $220, 195% upside. I don't really expect either company to reach those price targets within a year.
Buy Honda and Toyota, targets $50 and $140.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.