What To Expect From Toyota Motors’ Fourth Quarter Results

by Trefis Team
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Toyota Motors (NYSE: TM) is set to report its Q4 2018 (Apr-Mar fiscal year) results on 9 May 2018. The company expects a year-on-year (y-o-y) revenue growth of 5% for FY18 and y-o-y operating margin to improve by 40 basis points to 7.6%, largely due to a favorable foreign exchange rate, further aided by cost reduction and marketing efforts, and a reduction in overall expenses.

For the full-year 2018, Toyota reported a 1.3% y-o-y decline in the Toyota brand worldwide sales volume, whereas the Daihatsu and the Hino brand reported an even larger worldwide y-o-y sales decline of 7.1% and 7.2%, respectively. Focusing particularly on Japan, the Toyota brand experienced its first y-o-y decline, of 2.4%, in the last three years, although sales of Lexus remained strong, increasing by 7.2% y-o-y. The Toyota, Daihatsu, and the Hino brand together represented 44.4% of Japan’s market share, a decline by 60 basis points. Lower sales volume is expected to weigh negatively on the company’s top line.

Furthermore, Toyota’s presence in its biggest and second most valuable market in North America has been declining due to a shift in consumer preference towards larger SUV and crossover variants and a declining passenger market. This trend has impacted the company’s performance in the North American region where it reported a 3.1% decline in its operating margins for 9 months ended December as a result of an increased sales incentives and a decreased vehicle production in the region. Toyota is likely to struggle with a similar trend in its March quarter as well.

Toyota’s bottom line is expected to recover with margin improvement driven by a significant positive impact of foreign exchange gains coupled with a cost reduction, marketing, and expense reduction efforts. The company expects to achieve a net benefit of 130 billion yen (~$1.17 billion) from its cost reduction efforts, excluding the impact of foreign currency. The company’s 2018 expectations are outlined in our interactive dashboard, you can make changes to our assumed figures to arrive at your own EPS estimate for the company.


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