Toyota Q4 Earnings Beat, Shares Down - Analyst Blog

Shares of Toyota Motor Corp. TM fell 0.81% on May 8, after the company revealed a weak guidance for 2015. The automaker posted consolidated net income of ¥1.82 trillion ($17.7 billion) for fourth-quarter fiscal 2014 (ending Mar 31, 2014), surging from ¥962.1 billion ($10.5 billion) in the year-ago quarter.

Consolidated revenues in the quarter escalated 12.6% year over year to ¥6.57 trillion ($63.8 billion). Unit sales augmented 4.1% to 2.33 million units. Unit sales rose 18.5% to 724 thousand units in Japan and 9.2% to 214 thousand units in Europe. However, sales declined 6% to 567 thousand units in North America and 1.9% to 408 thousand units in Asia.

Operating income declined to ¥436.1 billion ($4.2 billion) from ¥502.3 billion ($5.5 billion) a year ago. The significant increase in income is due to favorable impacts of a weaker yen, increased vehicle sales and cost containment strategies.

Fiscal 2014 Results

Toyota recorded earnings of ¥574.92 ($5.75) per share in fiscal 2014, beating ¥303.78 ($3.66) per share in fiscal 2013. Net income increased to ¥1.82 trillion ($18.2 billion) from ¥962.2 billion ($11.6 billion) in fiscal 2013.

Consolidated revenues surged 16.4% to ¥25.69 trillion ($256.9 billion) from ¥22.06 trillion ($256.8 billion) in fiscal 2013.

Segment Results

The Automotive segment's revenues rose 12% to ¥6.05 trillion ($58.7 billion) in the quarter while its operating income declined 21.8% to ¥315.1 billion ($3.06 billion).

The Financial Services segment's revenues scaled up 14.2% to ¥368.5 billion ($3.58 billion), while the operating income improved 30.5% to ¥94.2 billion ($914.6 million).

All Other businesses revenues improved 18.3% to ¥364.8 billion ($3.5 billion) and operating income increased 47.8% to ¥23.2 billion ($225.2 million).

Financial Position

Toyota had cash and cash equivalents of ¥2.04 trillion ($20.4 billion) as of Mar 31, 2014, compared with ¥1.72 trillion ($20.7 billion) as on Mar 31, 2013. Total debt amounted to ¥16.33 trillion ($163.3 billion) as of Mar 31, 2014, compared with ¥14.1 trillion ($169.88 billion) as on Mar 31, 2013.

In fiscal 2014, operating net cash flow improved to ¥3.65 trillion ($36.5 billion) from ¥2.45 trillion ($29.5 billion) recorded in the year-ago period.

Fiscal 2015 Guidance

Toyota announced its projections for fiscal 2015. Consolidated revenues are estimated to be ¥25.7 trillion ($257 billion), in line with fiscal 2014. Operating income is expected to rise 0.3% year over year to ¥2.3 trillion ($23 billion). Net earnings are expected to fall 2.4% to ¥1.78 trillion ($17.8 billion) or ¥$561.56 ($5.62) per share.

Consolidated vehicle sales for fiscal 2015 are expected to be about 9.10 million units, down from 9.12 million in fiscal 2014.

Our Take

Toyota plays a pivotal role in shaping the global automobile industry. The automaker dominates the hybrid market with its Toyota and Lexus offerings. Toyota is banking on emerging markets, including Asia, for its sales growth. However, continued safety recalls and subdued macroeconomic factors are detrimental to its brand image and growth prospects.

Currently, Toyota carries a Zacks Rank #3 (Hold). Some better-ranked automobile stocks worth considering are U.S. Auto Parts Network, Inc. PRTS, Volkswagen AG (VLKAY) and Fuji Heavy Industries Ltd. (FUJHY). Currently, Volkswagen carries a Zacks Rank #1 (Strong Buy), while U.S. Auto Parts and Fuji Heavy Industries are Zacks Rank #2 (Buy) stocks.