HONDA MOTOR CO. LTD. ADRs $33 (New York symbol HMC; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.8 billion; Market cap: $59.4 billion; Price-to-sales ratio: 0.5; Dividend yield: 2.5%; TSINetwork Rating: Above Average; www.honda.com) is Japan’s secondlargest carmaker and the world’s biggest motorcycle manufacturer.
Like Toyota (see left), Honda’s sales are continuing to recover from the 2011 earthquake and tsunami. In its fiscal 2013 second quarter, which ended September 30, 2012, Honda sold 996,000 cars and trucks. That’s up 46.9% from 678,000 a year earlier. Motorcycle sales increased 1.8%, to 3.9 million from 3.8 million.
As a result, the company’s overall sales rose 19.0%, to $29.3 billion from $24.6 billion a year earlier. Earnings jumped 35.4%, to $1.1 billion, or $0.59 per ADR (each American Depositary Receipt represents one Honda common share). A year earlier, Honda earned $788 million, or $0.44 per ADR.
The company sells most of its cars in North America (41% of sales) and Asia, excluding Japan (30%). These regions are growing more quickly than Japan (17%), Europe (4%) and other countries (8%).
Honda’s sales in China have also declined due to the boycott. As well, slowing sales in the U.S. have prompted it to spend more on advertising and offer more incentives, both of which hurt its profits.
The company now expects to sell 4.12 million vehicles in its 2013 fiscal year, which ends March 31, 2013. That’s down 4.2% from its earlier prediction of 4.3 million. The lower sales will also cut its projected fiscal 2013 earnings by 20%, to $3.21 per ADR. The stock trades at 10.3 times that estimate.
However, new models, such as the company’s recently updated Accord sedan, should spur its sales in fiscal 2014.
Honda is a buy.
