Why Investors Reacted Negatively to Toyota’s Fiscal 2017 Earnings



Toyota’s fiscal 2017 earnings

On May 10, 2017, the largest Japanese automaker, Toyota Motor Corporation (TM), released its fiscal 2017 earnings report. The company’s adjusted EPS (earnings per share) for the fiscal year ended March 2017 stood at 605.5 Japanese yen (or ~$12.35), lower than the adjusted EPS of 741.4 yen (or ~$12.52) in fiscal 2016. Before we look at Toyota’s fiscal 2017 earnings results in detail, let’s take a quick look at how investors reacted on the day of the earnings release.

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Negative sentiments on Wall Street

On the day of its fiscal 2017 earnings release, Toyota’s ADR (American depositary receipt) fell 2.4% from the closing of the previous session to $105.81. The company’s lower net profit, weaker profit margins, and dismal fiscal 2018 guidance could be the primary reasons for investors’ negative reaction.

In 1Q17, the fight between the bulls and bears continued on Wall Street. In the first quarter, the S&P 500 Index returned 5.5%. During this quarter, Toyota disappointed investors and gave returns of -4.0%.

As of May 10, 2017, the company’s ADR has lost 9.7% on a YTD (year-to-date) basis. By comparison, other US auto giants (IYK) including General Motors (GM) and Ford (F) also have dropped 1.8% and 9.0% YTD, respectively.

In contrast, Italian-American auto giant Fiat Chrysler Automobiles (FCAU) has gained about 21.4% so far in 2017. FCAU’s consistently improving margins and debt condition could be the key reason for the optimism in its stock.

Series overview

In this series, we’ll take a closer look at Toyota’ fiscal 2017 revenues and profitability. We’ll find out what factors drove the company’s earnings for the fiscal year ended March 2017. We’ll also look at what the company is expecting in the coming fiscal year. Towards the end of the series, we’ll take a look at some important factors that may drive Toyota’s valuation in the coming quarters.


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