MINYANVILLE ORIGINAL Honda Motor Co.
(NYSE:HMC) registered a 36.1% increase in profits ($1.06 billion), which translated to a dividend of $0.59 per share. Nevertheless, analysts had predicted higher numbers. In other words, even though profits were up, Wall Street was not celebrating.
The company’s overall operating profit rose 92.1%, and was attributed to a number of factors, including unfavorable foreign currency rates, research and development, and higher sales volume. The automobile division increased unit sales by 42.9%, and operating income increased significantly, especially compared to the previous year’s loss.
Honda’s motorcycle division, which includes its discount fox apparel
line, dropped just over 13%. The drop, according to the company, was due to adverse foreign currency rates. As a result, operating income fell over 13 billion yen compared to the same quarter the previous years. Decreased sales of exported parts were cited as the primary culprit, along with currency rates.
Honda’s Financial Services edge up slightly, by 3.1%. But operating income sagged 10.6%. The drop was caused by gross losses on leased vehicles, which were down significantly.
Power Product revenues dropped despite a rise in overall unit sales. Once again, the stated culprits were the unbalanced foreign currency rates, along with the decreased revenues in the company’s other divisions. Operating profit increased, but just barely, rising 53 million yen, about $683,000.
The company’s debt-to-capitalization ratio is 47.7%. The previous quarter, the ratio was 48.3%. Its total debt is $51.7 billion. Capital expenditures increased significantly, almost 30%, and despite increasing profits, its cash on hand fell to $3.9 billion.
Honda lowered its projections for revenue for fiscal year 2013. According to a company spokesperson, the reduction is the result of ever-rising SG&A expenses, research and development costs, and the poor currency exchange rate. Therefore, Honda projects revenue to go up 23.3% , with operational profits growing by almost 125% , and net profit to jump 77.3%. Net profit should go up over 122%. Per share earnings will improve a little.
All that being said, Honda remains one of the preeminent car makers, sitting in the second spot behind Toyota Motor Corporation
(NYSE:TM), and don’t forget it is the largest maker of motorcycles in the world. Honda is good at what it does. At the present juncture, Zacks Consensus Estimate gives it a 3
, which means hold over the short term. Other analysts echo that advice, putting a Neutral stamp on Honda’s stock.
No one can really argue with that because it a nice, safe play. But it appears a little too safe. Currency rates will more than likely change in Honda’s favor after the upcoming elections. And the extant political tension over the nationalization of the islands will fester but little more. Investors should probably regard the company more aggressively and buy after the third quarter. Honda looks poised to exceed its lowered projections.
No positions in stocks mentioned.