Will Honda’s Revenue Grow In Q4 2019?

by Trefis Team
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Honda Motor Co. (NYSE: HMC), the Japanese Auto maker, is set to announce its Q4 2019 (ended March 2019) results on May 8, 2019, followed by a conference call with analysts. The market expects the company to report revenue close to $145 billion in FY 2019 (ended March 2019), which would be an increase of 4.7% on a y-o-y basis. The increase is mainly expected from higher sales volume in the automotive and motorcycle market. Market expectation is for the company to report earnings of $4.15 per share in Q4 2019 (ended March 2019), lower than $5.32 per share in the year-ago period.

 

Honda Motors reported $138.4 billion in Total Revenues in Fiscal year 2018. This included 4 revenue streams:

  • Automotive Revenue: $97.8 billion in FY 2018 (70.6% of Total Revenues). This includes revenue from passenger vehicles sold across the globe.
  • Motorcycle Revenue: $18.4 billion in FY 2018 (13.3% of Total Revenues). This includes revenue from motorcycles sold across the globe.
  • Power and Other Revenue: $3.1 billion in FY 2018 (2.3% of Total Revenues). This includes revenue from power units sold across the globe.
  • Financial Services: $19.1 billion in FY 2018 (13.9% of Total Revenues). This includes revenue from the financial services provided for purchasing or leasing vehicles of the company.

 

We have summarized our key expectations from the earnings announcement in our interactive dashboard – What Has Driven Honda Motor Company’s Revenues & Expenses Over Recent Quarters, And What Can We Expect For Full-Year 2019? In addition, here is more Consumer Discretionary data.

Key Factors Affecting Earnings:

Revenue expected in all segments:

  • Automotive Revenue has increased continuously over the years as sales volume has shown good growth. It increased from $88.6 billion in FY 2016 to $97.8 billion in FY 2018. Trefis estimates FY 2019 revenue to be around $104.7 billion.
  • Motorcycle Revenue has increased continuously over the years as sales volume has shown good growth. It increased from $15 billion in FY 2016 to $18.4 billion in FY 2018. Trefis estimates FY 2019 revenue to be around $20.4 billion.
  • Power business Revenue has increased continuously over the years as pricing has shown good growth. It increased from $2.8 billion in FY 2016 to $3.1 billion in FY 2018. Trefis estimates FY 2019 revenue to be around $3.2 billion.
  • Financial Services revenue has grown as the interest rate went up. It increased from $15.3 billion in FY 2016 to $19.1 billion in FY 2018. Trefis estimates FY 2019 revenue to be around $19 billion.

Trend in Expenses:

  • Total Expenses have moved mostly in line with Revenue. Cost of Sales has remained steady at around 79% of Total Revenue the last few quarters and is expected to remain the same in Q4 2019 (ended March 2019).
  • Indirect expenses are expected to increase back to near FY 2017 levels at around $18.1 billion.

Full Year Outlook:

  • For the full year, we expect gross revenue to increase by 6.5% to $278.3 billion in FY 2019.
  • Gross margin is expected to fall slightly to around 17.3%.

 

Trefis has a price estimate of $37 per share for Honda’s stock. The value is based on the expectation that the company will have positive growth volumes in the motorcycles and automotive segments, and thus experience an increase in revenue.

 

 

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