Toyota’s Outlook Lays Foundation For $93 Fair Value

Toyota (NYSE:TM) impressive results last quarter and 2013 outlook support our positive view for the company. The company’s sales increased by 23% in the last quarter while its profit jumped by 376% to $1.5 billion. These numbers should be discounted for the fact that the financial results of prior year quarter were depressed by the effects of Tsunami in Japan which destroyed a major chunk of Toyota’s production capacity. However, growth has been much faster than predicted and Toyota now looks set to achieve it’s pre-disaster sales and profitability levels.

For the full financial year of 2012 , the effects of Tsunami and the Thailand floods were very visible as the company recorded an over 100% decline in revenues, operating income and net income. Currency fluctuation and a slow down of sales in North America have added to other woes of the company. Toyota competes with North American automotive majors like GM (NYSE:GM), Ford(NYSE:F), Chrysler apart from its Asian peer manufacturers like Honda (NYSE:HMC) and Suzuki (7269:Tokyo). We currently have a $93 price estimate for Toyota’s stock is about 20% above the current market price.

See our full analysis for Toyota’s stock here

Fuel efficient cars lead the way

Toyota’s line of fuel efficient cars continue to lead its growth globally. The company which is already the most fuel-efficient full-line auto manufacturer in the United States, has strengthened its portfolio of efficient cars with five new models that offer an average combined fuel economy of 44 mpg. The company sold 105,405 units of its Camry branded vehicles last quarter, an increase of 33.6% compared to last year. It also managed to sell 60,859 Prius models, an increase of 38.6% over the prior year. While the Camry Hybrid (EPA rated 40.5 mpg combined average for LE and XLE trim levels) made its way into the market last quarter, the Prius plug in launched in the U.S. on March 12. Prius continues to be the world’s best-selling fuel-efficient vehicle, with more than 3.5 million vehicles sold worldwide.

Lexus car sales increase marginally, but trucks falter

Toyota’s luxury car brand, Lexus, saw a marginal 1% increase in sales as the gains in the car division was offset by weakness in the light trucks market. The company sold 27,350 Lexus cars in the last quarter, an increase of 21.2% compared to the last year. The Lexus truck sales, however, saw a decline of 16.5%, totaling around 21,746 units. This was detrimental to company’s operating margins as Lexus typically commands higher margins.

For the coming financial year, Toyota has forecast a revenue growth of 181% and profit growth of 171% to $9.5 billion. Though achievable, reaching these numbers will take good execution by Toyota as threat to its market share from resurgent competitors is starting to become more potent. While Daimler and Volswagen, both of whom have posted record sales, will weigh heavily on Lexus sales, General Motors, Ford and Toyota will try and take Toyota’s market share of the fuel efficient segment.

Understand How a Company’s Products Impact its Stock Price at Trefis