Could Toyota’s Raised Growth Outlook Drive Optimism?

Jitendra Parashar - Author

Nov. 23 2017, Updated 9:01 a.m. ET

Toyota last week

Last week, which ended November 17, 2017, Toyota Motor (TM) traded on a negative note and settled at $123.29, a weekly fall of 1%.

Despite last week’s negative price movement, the company’s ADR (American depositary receipt) has risen 4.3% quarter-to-date as of November 20, 2017. TM released its fiscal 2Q18 (quarter ended September 30, 2017) results on November 7, 2017. Let’s take a quick look at those results and find out if they could keep optimism alive among investors.

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Positive factors

For fiscal 2Q18, Toyota reported adjusted earnings of 152.87 Japanese yen, or ~$1.35 per share. That was ~19% higher than its earnings in fiscal 2Q17. During fiscal 2Q18, Toyota reported more than a 10% YoY (year-over-year) rise in global revenues despite a stagnation in its consolidated vehicle sales.

Similarly, the company’s net profit margin improved to 6.4% in fiscal 2Q18 compared to 6.1% in fiscal 2Q17, which seemed to add optimism. After reviewing these positive growth factors, Toyota’s management raised its guidance for fiscal 2018. Now the company expects its fiscal 2018 operating profit to be 2 trillion Japanese yen compared to 1.85 trillion Japanese yen guided earlier this year.

In 2016, Toyota was the third-largest auto company (IYK) in the United States by sales volume after General Motors (GM) and Ford (F). Last year, Toyota replaced Fiat Chrysler (FCAU) as the third-largest auto company in the United States.

Key technical levels

As of November 20, 2017, Toyota’s ADR was $124.29, not far from its two-year high of $128.11. The ADR was bouncing back from a key support near $122.50. The two-year high of $128.11 could act as a key resistance level, and a violation of the level could attract fresh buying in the coming weeks.

In the next and final part of this series, we’ll look at some key reasons for recent optimism in Advance Auto Parts (AAP) stock.


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