Updated Research Report on Toyota - Analyst Blog

On Mar 20, 2014, we issued an updated research report on Toyota Motor Corporation TM. Its leading position in terms of global vehicle sales, improved 2014 guidance, rising cash flows and expansion in emerging markets are various positives. Moreover, the automaker plays a pivotal role in the global market for environment-friendly vehicles.

Toyota posted earnings per share of ¥165.70 ($1.65) in third-quarter fiscal 2014 (ending Dec 31, 2013), significantly higher than ¥31.55 (39 cents) recorded a year ago. Consolidated net income surged to ¥525.5 billion ($5.3 billion) from ¥99.9 billion ($1.2 billion) in the year-ago quarter. Consolidated revenues in the quarter escalated 23.8% year over year to ¥6,585.0 billion ($65.9 billion).

Toyota surpassed General Motors Company GM and Volkswagen AG (VLKAY) to become the largest-selling automaker in 2012 and retained the crown in 2013 due to strong demand in both the Japanese and international markets. Toyota projects a global sales volume of 10.3 million units in 2014, up 4% over 2013. If the company attains this forecast, it will become the first automaker to surpass the 10-million mark.

Toyota is banking on emerging markets, including Asia, for its sales growth. By 2015, the automaker plans to introduce eight compact car models in the emerging markets, including Brazil, China, India and Indonesia, to catch up with other leading automakers in the market. 

Toyota increased its consolidated revenue guidance for fiscal 2014 (ending Mar 31, 2014) to ¥25,500 billion ($255 billion), an increase of 15.6% from fiscal 2013. Earlier, the company projected revenues of ¥25,000 billion. Operating income is expected to rise 81.7% year over year to ¥2,400 billion ($24 billion). Net earnings are expected to go up 97.5% to ¥1,900 billion ($19 billion), from ¥1,670 billion expected earlier. Most of these increments were due to changes in currency exchange rates and favorable operating results. Meanwhile, the projected consolidated vehicle sales guidance was increased to 10.1 million units for fiscal 2014, up 408,000 units from fiscal 2013, driven by increase in vehicle sales outside Japan.

Currently, Toyota carries a Zacks Rank #2 (Buy). Another automobile stock worth considering is Tata Motors Limited TTM, which sports a Zacks Rank #1 (Strong Buy).