Do Analysts Expect Honda to Outperform Toyota in 2018?



Analysts on Honda

According to the consensus data as of February 20, 2018, a majority of analysts (~52%) covering Honda Motor Company (HMC) have given it “buy” recommendations. The remaining analysts (48%) have suggested “holds” on the stock. Interestingly, no analysts have recommended “sells” on the stock at the moment.

The above recommendations are based on consensus data from 23 analysts compiled by Thomson Reuters.

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Upside potential

On February 20, 2018, analysts’ 12-month consensus target price for Honda’s ADR (American depositary receipt) was $40.12. This consensus target price has significantly risen in the last two months compared to $36.92 earlier.

On the NYSE, the February consensus target for Honda suggests a positive return potential of ~12.7% from its market price of $35.59. This upside potential is much better compared to analysts’ expectations from Toyota’s ADR as discussed in the previous part of this series.

Note that Honda, like its Japanese peer Toyota Motor (TM), is not directly listed on any stock exchange in the US market, but the ADRs of both companies are traded on the NYSE.

Recent updates

In 2017, Honda reported positive growth in its US sales for the sixth consecutive year. However, the company’s US light vehicle sales fell 1.7% YoY (year-over-year) in January 2018 primarily due to a 2.5% decline in its truck segment’s sales.

In its fiscal 3Q18 ended December 31, 2017, Honda reported a solid 224.8% YoY rise in its EPS (earnings per share), while its global revenue inched up 13%. The company’s operating profit jumped 37% mainly due to its positive product mix. With this, HMC’s operating profit margin expanded to 7.2% in fiscal 3Q18 from 5.9% in fiscal 3Q17.

In the previous quarter, Honda’s operating profits saw the negative impact of costs related to a massive vehicle recall to fix faulty Takata airbags. Faulty airbags from Japanese manufacturer Takata have also affected other automakers (IYK) including Fiat Chrysler Automobiles (FCAU), Toyota, and Ford Motor Company (F).

Nevertheless, after Honda’s fiscal 3Q18 earnings report, analysts’ ratings on the company reflected optimism.

Read on to the next article to learn what analysts are recommending for Ferrari in February 2018.


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