Honda Reports Lower Q3 Earnings but Revises Full Fiscal Year Forecast Upwards; Announces Share Buyback (HMC)

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Honda (HMC), Japan's third largest domestic manufacturer of automobiles reported its 3rd quarter earnings after the Tokyo Stock Exchange closed today. Essentially Honda had a nice quarter as it set new all-time quarterly records in consolidated net sales, operating revenue, and net income as a result of increased revenues, cost reduction efforts, and positive FOREX impact. However, these gains were offset by higher SG&A and R&D expenses and hedging, sending quarterly net income downward by 11.6%. Basic net income per common share (basic EPS) was 144.81 yen or US$1.23 but keep in mind Honda's ADRs are listed at a 2:1 ratio meaning 2 HMC ADRs represent 1 common share; therefore EPS listed in the U.S. will be $0.615.

For all the details and numbers of Honda's earnings see the following links:

Honda Q3 Earnings News Release

Honda Consolidated Financial Results for Fiscal Q3 and 9-Months Ended Dec. 31, 2005

PRNewswire-FirstCall - Honda's Q3 and 9-Months Ended Financial Results

Some key things to take note of are Honda revised its full fiscal year ending March 31, 2006 forecast upwards. For consolidated results Honda forecasts a +12.6% increase in net sales and other operating income, +36.3% increase in operating revenue, +25.6% increase in income before taxes, and +24.4% increase in net income.

Honda also announced a share buyback plan to acquire 5.8 million shares between Feb. 6 and Apr. 14 this year. This represents 0.62% of its 928.4 million shares outstanding. Furthermore, Honda announced its intention to retire 11 million shares of treasury stock (1.18% of shares outstanding) on February 7th.

In an interesting note on just how important of a role FOREX rates play, Bloomberg reported Honda's annual operating profit gains about 12 billion yen ($105 million) for every 1 yen Japan's currency weakens against the dollar, according to an estimate by Merrill Lynch & Co.

Honda's shares ended the day up 1.37% in Japan (ticker: 7267) ahead of the firm's after market earnings release. At the time of publishing Honda's ADRs (HMC) were up 1.17% in morning trading.

HMC 1-yr chart: