What To Expect From Honda Motors’ Q1 Earnings

by Trefis Team
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Honda Motors (NYSE: HMC) will release its fourth quarter and full-year 2018 results on April 27th. The company is expected to experience a progressive decline in its operating profits as outlined in its last quarter earnings presentation. Revenues are expected to remain higher, backed by strong sales volume and better product mix. The figure below outlines our expectations for the company’s 2018 results.

Honda Motors saw strong sales in Asia and based on its third-quarter results, the company had revised its guidance for fiscal year 2018. The company expects a nearly 1.5% increase in motorcycle unit sales compared to its previous guidance driven primarily by a projected increase of 230,000 unit sales in Asia. Similarly, in the automobiles segment, the company expects a nearly 2% increase in unit sales compared to its previous forecast, driven by a projected increase of 85,000 units in Asia.

However, Honda’s recent sales numbers have displayed some hiccups and therefore might face some headwinds. American Honda reported a year-to-date (YTD) decline in sales volume of -0.8% in the March quarter, with some recovery in volume experienced in the month of March. American Honda in the last month of the fourth quarter benefited from a stronger U.S. economy and a positive model mix offered by the company, offsetting the decline in sales experienced in the initial two months of the quarter. Additionally, Honda’s sales volume in China were down by 2.3% in the fourth-quarter as a resultant impact of a certain quality issue that the company is facing in the country. Although these issues have been marked as temporary, the decline in sales volume is expected to have a material impact on the company’s upcoming quarter results in comparison to previous quarters.

For the fiscal year 2018, Honda Motors expects a ~9% increase in revenues and a nearly ~8% decline in operating profit compared to the previous year. Operating margin is expected to be around 5% for this fiscal year, representing ~1% decline. Our key expectations from the company’s results have been outlined in our interactive dashboard. You can make changes to our assumptions to arrive at your own fair price estimate for the company.

 

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