Honda Revenue Grows In FY 2019, Will It Sustain In FY 2020?

by Trefis Team
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Honda Motor Co. (NYSE: HMC), the Japanese Auto maker, announced its Q4 2019 (ended March 2019) and FY 2019 results on May 8, 2019, followed by a conference call with analysts. For the year, the company missed consensus for revenue and reported $143.1 billion, up by 3.4% y-o-y. The increase was driven largely by an increase in sales volume, particularly in Asia-Pacific. The earnings missed consensus and were recorded at $3.12, lower than the $5.32 per share in FY 2018.

 

Honda Motors reported $143.1 billion in Total Revenues in Fiscal year 2019. This included 4 revenue streams:

  • Automotive Revenue: $99.8 billion in FY 2019 (69.7% of Total Revenues). This includes revenue from passenger vehicles sold across the globe.
  • Motorcycle Revenue: $18.9 billion in FY 2018 (13.2% of Total Revenues). This includes revenue from motorcycles sold across the globe.
  • Power and Other Revenue: $3.2 billion in FY 2018 (2.2% of Total Revenues). This includes revenue from power units sold across the globe.
  • Financial Services: $21.3 billion in FY 2018 (14.9% 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 growth expected:

  • Automotive Revenue has increased continuously over the years as sales volume has shown good growth. It increased from $93.4 billion in FY 2017 to $99.7 billion in FY 2019. Trefis estimates FY 2020 revenue to be around $107.9 billion.
  • Motorcycle Revenue has increased continuously over the years as sales volume has shown good growth. It increased from $15.9 billion in FY 2017 to $18.9 billion in FY 2019. Trefis estimates FY 2020 revenue to be around $21.6 billion.
  • Power business Revenue has increased continuously over the years as pricing has shown good growth. It increased from $2.9 billion in FY 2017 to $3.2 billion in FY 2019. Trefis estimates FY 2020 revenue to be around $3.4 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. In Q4 2019 (ended March 2019) it increased slightly to 80.4% of Total Revenue.
  • Indirect expenses for FY 2019 increased mostly due to the higher provision of income tax at $2.7 billion. In FY 2020 we expect the Taxes to be stable and indirect expenses to be around $17.7 billion.

Full Year Outlook:

  • For the full year, we expect gross revenue to increase by 6% to $151.7 billion in FY 2020.
  • Gross margin is expected to fall slightly to around 16.7%.

 

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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