Honda Ends Year Strongly But Issues Cautious Guidance For FY 2018

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HMC: Honda Motor logo
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Honda Motor

Honda Motor Co. (NYSE: HMC) reported earnings for the fourth quarter of fiscal year 2017 on Friday, April 28. The Japanese auto maker reported a significant increase in earnings per share despite its revenue only growing by a modest 3%. Similar to last year, Honda’s operating margin fell progressively through the year, but in 2017 it was considerably higher in Q4 at 3.7% compared to -1.7% in Q4 2016.

hmc q4 17

Honda’s most profitable and highest selling region in the past few years has been North America. The Japanese auto maker has dominated the sedan segment in the U.S. car market with the Accord and Civic. However, passenger car sales have been declining year on year in the U.S. for months now. Honda managed to escape this trend with the launch of a new model of the Accord in 2016. Its year over year sales growth of 9.4% meant that Honda’s overall car sales grew by 0.6%, an impressive feat compared to the 8% decline in the market last year.

The company also ran into production constraints with the CR-V last year, which limited the growth of the SUV segment. Having fixed that this year, Honda saw its two SUVs – CR-V and HR-V – grow by 32% and 27%, respectively, in the first quarter. Despite this, the company’s overall sales in North America declined by 4.2% year over year. Honda expects this trend of weak passenger car sales to continue in 2018 and as a result it expects its sales in Asia, driven by China, to overtake North America sales.

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Asia was one of the brightest spots for the company in 2017, as it posted double digit growth in the region in three out of four quarters. Overall sales in the region grew by 14% to 1.96 million for the company. Honda expects growth to slow down next year to 4.9%, but that should still mean that it will overtake North America as the region where the company expects to sell most vehicles. The Japanese auto maker has also guided that its operating profit will decline by around 16% in the next fiscal year on the back of unfavorable currency fluctuations and increased expenditure to keep up with the ongoing investments in self-driving, mobility services and low-emission power trains.

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2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Honda Motor

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