Toyota Motors Q1 2018 Earnings Preview

by Trefis Team
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Toyota Motors (NYSE:TM) will report its Q1 FY 2018 (fiscal year Apr-Mar) earnings on August 4th and with a slowdown in Japan and unfavorable exchange rates, this could be a challenging quarter for the company. In the fiscal year 2017, Toyota reported a nearly 3% decline in revenues and a nearly 21% decline in net income. The company’s guidance indicates that the net income for 2017-2018 could also decline by 18%, making this fiscal year its worst in 20 years. (Read Toyota Faces A Challenging Time Ahead).

Below is a summary of the company’s production and sales during the months of April, May and June of 2017:

*Year on Year change is on a DSR basis.

From the above data it can be seen that the slow-down in the passenger cars segment has impacted Toyota Motors significantly. Passenger vehicles such as the Camry and Corolla brands have been a steady revenue stream for Toyota and a decline in this segment is likely to impact the company’s revenues negatively this fiscal year. (Read Passenger Car Market Decline A Huge Worry For Toyota And Honda).  Japan is a key driver of revenues for Toyota Motors and a slowdown in this region is likely to impact the company negatively.

Toyota reports its earnings in Yen. This means that if the Yen appreciates relative to the U.S. dollar, Europe, and other currencies, sales made in these currencies are less valuable in Yen terms. Moreover, since close to half of Toyota’s production is based in Japan, these sales are more expensive in dollar terms, thereby lowering the company’s operating income in dollar terms. The Yen has been appreciating against the dollar, which is also likely to impact the earnings of Toyota.

Overall, we do not expect Toyota Motors to report strong results for Q1 2018. We will be watching for its ability to navigate through this challenging environment and whether it has been able to maintain its margins in this environment.

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 Toyota Motor

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