Reuters Insider - Toyota avoiding potholes as earnings prove positive
05/11/2014 16:43
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Source: Thomson Reuters
Description: The world's #1 automaker is accelerating on strong
earnings, helped by a weaker yen and solid
overseas sales. But a weak domestic economy and
tough competition from China suggests a bumpy road
ahead.
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Transcript (May be auto-generated)
If you were to give a report card for Toyota's earnings, the company should earn
a solid "A". That's because Toyota revised up its profit forecast for the
current business year. A weaker Yen and solid overseas sales are offsetting the
negative impact of sluggish consumption in Japan where a sales tax hike in April
is hitting spending. Experts agree, saying Toyota shares are clearly a "buy". In
fact, none of the analysts polled by Thomson Reuters advised investors to sell
or even just hold on to them. That's in contrast to rival Honda who already hit
some potholes in 2014. Japan's third biggest carmaker had to slash its full year
net profit forecast by 6% as customers are shying away after a series of recalls
of its popular Fit Hatchbacks. And even with the latest market rally inspired by
the Bank of Japan's stimulus acceleration, Honda shares are underperforming the
overall market - still below its price at the start of October. Despite Honda's
disappointing earnings, the auto sector seems to be in decent shape in general
with record profits at Mazda and Fuji Heavy Industries known for its Subaru
cars. But the future is not necessarily bright for Japanese carmakers and Toyota
is no exception, says auto analyst Takaki Nakanishi. The outlook is somewhat
different because of through the demand in Japan and that we continue to have a
tax program, and also a competition in China is getting much keener. And also,
we are always having a slowdown in Europe, particularly Russia, South America,
and also Southeast Asia. Nakanishi warns that the weak Yen may only give
Japanese carmakers a temporary boost and what's really needed is a pick-up in
domestic demand - something that's beyond their control and perhaps an issue
Prime Minister Shinzo Abe needs to tackle