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Why Did Honda Motor Launch NSX in Japan?

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Nov. 20 2020, Updated 5:18 p.m. ET

Price movement

Honda Motor (HMC) has a market cap of $54.2 billion. It rose by 0.07% to close at $30.62 per share on August 25, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 2.2%, 12.8%, and -4.1%, respectively, on the same day. HMC is trading 5.1% above its 20-day moving average, 12.5% above its 50-day moving average, and 8.4% above its 200-day moving average.

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Related ETF and peers

The Vanguard FTSE Pacific ETF (VPL) invests 1.1% of its holdings in Honda Motor. 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 6.4% on August 25.

The market caps of Honda Motor’s competitors are as follows:

  • Toyota Motor (TM) — $198.3 billion
  • Ford Motor (F) — $49.3 billion
  • General Motors (GM) — $48.8 billion

Latest news on Honda Motor

In a press release on August 25, 2016, Reuters reported, “With its aggressive design and six-figure price tag, Honda Motor Co’s revamped NSX is a far cry from its ‘cheap and cheerful’ Civic sedans, but the automaker is betting the sports car launched in Japan on Thursday will turbo-charge its brand image.”

It added, “The new NSX, jointly developed by Honda’s U.S. and Japanese engineers and produced in the United States, marks the revival of the model after the automaker stopped production of the ‘Asian Ferrari’ in 2005.”

According to Honda CEO Takahiro Hachigo, “Generating profit from the NSX may be a struggle, but by focusing on both functional cars and also advanced performance we will raise the Honda brand.”

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Performance in fiscal 1Q17

Honda Motor reported fiscal 1Q17 sales revenue of ~3.5 trillion Japanese yen, or about $30 billion—a fall of 6.3% from the sales revenue of ~3.7 trillion yen, or about $40 billion, in fiscal 1Q16.

Sales revenues from its Motorcycle business, Automobile business, Financial services business, and Power product and other businesses fell by 8.5%, 6.6%, 1.9%, and 8.3%, respectively, between fiscals 1Q16 and 1Q17. The company’s operating profit rose by 11.5%.

Its net income and EPS (earnings per share) fell to 189.9 billion yen and 96.93 yen, or about $1.9 billion and ~$0.97, in fiscal 1Q17, compared with 203.9 billion yen and 103.22 yen, or about $2 billion and about $1.03, in fiscal 1Q16.

Honda Motor’s cash and cash equivalents and inventories fell by 4.8% and 6.3%, respectively, between fiscals 4Q16 and 1Q17. Its current ratio and debt-to-equity ratio fell to 1.11x and 1.5x, respectively, in fiscal 1Q17, compared with 1.14x and 1.6x, respectively, in fiscal 4Q16.

Projections

Honda Motor made the following projections for fiscal 2017:

  • sales revenue of ~13.8 trillion yen, or about $140 billion
  • operating profit of 600.0 billion yen, or about $6 billion
  • profit before income tax of 705.0 billion yen, or about $7 billion
  • profit of 390.0 billion yen, or about $3.9 billion
  • EPS of 216.39 yen, or about $2.16

For an ongoing analysis of this sector, please visit Market Realist’s Consumer Discretionary page.

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