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Canon Announces Its New Investment Plans

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Price movement

Canon (CAJ) has a market cap of $39.1 billion. It rose 0.83% to close at $29.29 per share on September 22, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 3.0%, 2.3%, and -2.8%, respectively, on the same day.

CAJ is trading 2.0% above its 20-day moving average, 2.8% above its 50-day moving average, and 1.5% above its 200-day moving average.

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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 9.5% on September 22.

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

  • Hewlett-Packard (HPQ) — $25.9 billion
  • Kyocera (KYO) — $18.6 billion
  • Xerox (XRX) — $10.2 billion

Latest news on Canon

In a press release on September 22, 2016, Canon reported, “Canon USA, Inc., a leader in digital imaging solutions, today announced that it has made an equity investment in T2 Biosystems, Inc., a company developing innovative diagnostic products to improve patient health.

“Through this investment, Canon U.S.A. has purchased approximately 40 million dollars of the company’s stock at the closing market price of $6.56 in a private placement, resulting in Canon’s ownership of approximately 19.9 percent of T2 Biosystems. Canon U.S. Life Sciences, Inc., a wholly owned subsidiary of Canon U.S.A. began working with T2 Biosystems back in February of 2015 to develop a diagnostic test panel for rapidly detecting Lyme disease.”

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Canon’s performance in 2Q16

Canon (CAJ) reported 2Q16 net sales of 860.2 billion Japanese yen (about $8.4 billion), which represents a fall of 11.7% from its net sales of 974.4 billion yen (about $9.5 billion) in 2Q15. Sales from its Office and Imaging System units fell 15.0% and 13.5%, respectively. Sales from its Industry and Other segments rose 5.8% between 2Q15 and 2Q16. The company’s gross profit margin and operating income fell 2.8% and 34.5%, respectively.

The company’s net income and EPS (earnings per share) fell to 53.4 billion yen (about $523 million) and ~48.9 yen (about $0.48), respectively, in 2Q16 compared to 68.2 billion yen (about $668 million) and 62.44 yen (about $0.61), respectively, in 2Q15.

Canon’s cash and cash equivalents and inventories fell 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, as compared with 2.5x and 0.39x, respectively, in 4Q15.

Projections

Canon (CAJ) has made following projections for fiscal 2016:

  • net sales of 3.5 trillion yen (about $34 billion), a fall of 7.4% from fiscal 2015
  • operating profit of 265 billion yen (about 2.6 billion), which represents a fall of 25.4% from fiscal 2015
  • net income of 180 billion yen (or $1.8 billion), which represents a fall of 18.3% from fiscal 2015

This drop in performance and outlook are mainly due to the global economic slowdown and the negative impact of the foreign exchange rate.

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

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