Auto Makers Look Strong
November 02 2015 - 3:02AM
Dow Jones News
(FROM THE WALL STREET JOURNAL 11/2/15)
By Yoko Kubota
Japan's top three auto makers are expected to announce a rise in
quarterly profits this week, as investors closely watch the
companies' vehicle sales forecasts to gauge the health of the
world's two biggest vehicle markets.
Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co. have
been boosted by solid July-September sales in the U.S., their
biggest market, where autos are being bought at the fastest pace in
15 years. But investors are hoping for signs that a decline in
sales in China, amid an economic slowdown that has squeezed
consumer spending, has bottomed out.
The three companies have had varied performances in China, where
car sales fell year-over-year for three months in a row before
growing again in September. Toyota and Honda have been
outperforming the sluggish car market in recent months, while
Nissan sales have been dragged down.
Some analysts say that Toyota and Nissan could raise their
full-year profit forecasts. Whether the Japanese auto makers will
raise or cut their full-year vehicle sales forecasts for China and
the U.S., as well as the outlook from executives on marketwide
demand for the coming months, will give an indication of how
confident auto makers are about the two main markets that account
for more than one-third of global auto sales.
Toyota is heading into its third-straight year of record annual
profit, having outsold Volkswagen AG and General Motors Co. in
global vehicle sales for the nine months to September.
Volkswagen's recent diesel scandal also might dent sales for the
German auto maker and give a boost to its Japanese rivals, although
overlaps are limited between their key markets and products.
Overall, strong U.S. sales and a weak yen are likely to
contribute to quarterly profit growth at the Japanese auto makers.
Analysts polled by Thomson Reuters expect Nissan's second quarter
profit to rise 5% from a year earlier to 132 billion yen ($1.1
billion). For Honda, quarterly net profit is likely to grow 7% to
129 billion yen, while for Toyota, net profit is expected to
increase 14% to 614 billion yen.
Demand in the U.S. for sport-utility vehicles and pickup trucks
has been vigorous, and some analysts expect overall U.S. sales to
reach 17.4 million vehicles in 2015, the highest annual volume
since 2000.
The yen is trading at roughly 120 against the dollar, weaker
than the top three auto makers' assumed full-year yen rate against
the dollar at between 115 and 117. Generally, a weaker yen boost
profits from overseas.
For Toyota and Nissan, there is a lag of one quarter in
incorporating China-related figures in the companies' earnings,
because of accounting methods. Their second-quarter reports will
reflect their April-June China results.
Nissan will announce its July-September results on Monday,
followed by Honda on Wednesday and Toyota on Thursday.
Still, Japanese auto makers, like the rest of the auto sector,
face uncertainties in their biggest markets.
In the U.S., some regulators have warned of risky auto-lending
activities, raising concerns over how much longer the strong market
can be sustained.
Investors are also trying to gauge whether the slowdown in China
has hit bottom after the government cut taxes for small cars.
Last week, two of Japan's biggest auto-parts suppliers, Denso
Corp. and Aisin Seiki Co., cut their full-year net-profit outlook,
citing uncertainties in China and in Southeast Asia, a stronghold
of Japanese auto makers that has been hit by declining vehicle
sales.
An expected interest-rate increase by the Federal Reserve is
casting a shadow over emerging countries such as Brazil and Russia,
where auto demand has been plunging.
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(END) Dow Jones Newswires
November 02, 2015 02:47 ET (07:47 GMT)
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