Lower costs prepare them for better days: Toyota Motors and Honda Motors

Article Excerpt

COVID-19 continues to hurt new vehicle sales at these two Japanese carmakers. However, both are cutting their costs, which sets them up for a strong earnings rebound when sales bounce back. Both stocks also offer investors above-average dividend yields. TOYOTA MOTOR CO. ADRs $155 is a buy. The stock (New York symbol TM; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.4 billion; Market cap: $217.0 billion; Price-to-sales ratio: 0.6; Dividend yield: 2.6%; TSINetwork Rating: Above Average; www.toyota.com) gives you exposure to the world’s largest automaker. In its fiscal 2021 second quarter, ended September 30, 2020, Toyota’s sales fell 17.6% to 1.93 million vehicles. Sales in Japan fell 8.4%; North America dropped 8.0%; and Asia (excluding Japan) and other regions fell 40.4%. However, sales in Europe improved 1.2%. Overall revenue in the quarter also declined 7.2%, to $63.9 billion from $68.9 billion a year earlier. The company’s earnings dropped 10.4%, to $4.44 billion from $4.96 billion (it did not provide per ADR figures). As the global…