uploads/2016/07/caj-pm-4.png

Global Economic Slowdown Taking a Toll on Canon

By

Updated

Price movement

Canon (CAJ) has a market cap of $36.6 billion. It fell by 3.3% to close at $27.30 per share on July 26, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -3.0%, -6.4%, and -9.4%, respectively, on the same day. CAJ is trading 3.6% below its 20-day moving average, 4.4% below its 50-day moving average, and 6.7% below its 200-day moving average.

Article continues below advertisement

Related ETF and peers

The Vanguard FTSE Pacific ETF (VPL) invests 0.67% of its holdings in Canon. The ETF tracks the FTSE Developed Asia Pacific Index, a market-cap weighted index of securities in the developed markets of the Pacific region. The YTD price movement of VPL was 3.3% on July 26.

The market caps of Canon’s competitors are as follows:

  • HP (HPQ): $24.4 billion
  • Kyocera (KYO): $18.0 billion
  • Xerox (XRX): $10.1 billion

Performance of Canon in 2Q16

Canon reported 2Q16 net sales of 860.2 billion Japanese yen, a fall of 11.7% from the net sales of 974.4 billion yen in 2Q15. Sales of the office and imaging system units fell by 15.0% and 13.5%, respectively, and sales of the industry and other segments rose by 5.8% between 2Q15 and 2Q16. The company’s gross profit margin and operating income fell by 2.8% and 34.5%, respectively.

Its net income and EPS (earnings per share) fell to 53.4 billion yen and 48.94 yen, respectively, in 2Q16, compared with 68.2 billion yen and 62.44 yen, respectively, in 2Q15.

Canon’s cash and cash equivalents and inventories fell by 10.2% and 4.5%, respectively, between 4Q15 and 2Q16. Its current ratio fell to 1.3x and debt-to-equity ratio rose to 0.59x in 2Q16, compared with 2.5x and 0.39x, respectively, in 4Q15.

Projections

The company has made following projections for fiscal 2016:

  • net sales of 3.5 trillion yen, a fall of 7.4% from fiscal 2015
  • operating profit of 265.0 billion yen, a fall of 25.4% from fiscal 2015
  • net income of 180.0 billion yen, a fall of 18.3% from fiscal 2015

This drop in the performance and outlook are mainly due to the global economic slowdown and the negative impact of the foreign exchange rate. In the next part of this series, we’ll discuss The Hershey Company.

Advertisement

More From Market Realist