TOYOTA MOTOR CO. ADRs $84 (New York symbol TM; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.7 billion; Market cap: $142.8 billion; Price-to-sales ratio: 0.7; Dividend yield: 1.5%; TSINetwork Rating: Above Average; www.toyota.com) is Japan’s largest automobile maker and the world’s second-biggest after General Motors. Toyota also makes industrial equipment, such as forklifts and prefabricated housing. Like most carmakers, it offers vehicle loans through its financing division.
The company is starting to recover from the disruptions caused by the March 2011 earthquake and tsunami in Japan and the recent flooding in Thailand. Toyota sold 2.0 million vehicles in its fiscal 2012 third quarter, which ended December 31, 2011, up 9.3% from 1.8 million a year earlier.
As a result, its revenue rose 12.3%, to $63.2 billion from $56.3 billion. However, higher income taxes and unfavourable exchange rates cut its earnings by 6.8%, to $1.05 billion, or $0.61 per ADR, from $1.1 billion, or $0.65 per ADR. (Each American Depositary Receipt represents two Toyota common shares.)
Toyota continues to shift production away from Japan. As part of this move, it plans to spend $400 million to produce more Highlander sport utility vehicles at its plant in Indiana. This will cut the company’s exposure to the high Japanese yen, which makes cars exported from Japan more expensive.
The high yen will probably limit Toyota’s earnings to $2.37 per ADR in fiscal 2012. The stock trades at a high 35.4 times that figure. However, it trades at a more reasonable 15.8 times the company’s forecast fiscal 2013 earnings of $5.31 per ADR.
Toyota is a hold.
