Analysts’ Views: Could Honda Outperform Toyota in 2018?


Mar. 28 2018, Published 2:32 p.m. ET

Analysts on Honda

According to analysts’ consensus data on March 27, about 57.0% analysts covering Honda Motor Company (HMC) gave it “buy” recommendations. The remaining 43.0% of analysts suggested a “hold.” No analysts recommended a “sell” on the company. These recommendations are based on 21 Wall Street analysts’ consensus data compiled by Thomson Reuters.

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Upside potential comparison

On March 27, 2018, analysts’ 12-month consensus target price for a Honda ADR (American depository receipt) was $40.80. This consensus target price had risen significantly from $36.92 about three months ago.

On the NYSE, analysts’ consensus target for HMC suggested a positive return potential of ~21.0% from its market price of $33.73. This upside potential was much better than the 8.0% upside potential of Toyota’s ADR, which we discussed in the previous part of this series.

Like its Japanese peer Toyota (TM), Honda isn’t directly listed on any US stock exchange. However, the ADRs of both companies are traded on the NYSE.

Key updates

In the first two months of 2018, Honda’s US sales volume has fallen 3.5% YoY (year-over-year). In January and February combined, the company’s US car sales dropped 3.3%, and its truck sales declined 3.6% YoY. In 2017, Honda reported positive growth in its US sales for the sixth consecutive year.

In its fiscal 3Q18[1. fiscal 3Q18 ended December 31, 2017] results, Honda reported a solid 224.8% YoY increase in its earnings per share. During the quarter, its global revenues rose 13.0%.

The company’s operating profit rose 37.0% mostly due to a positive product mix. With this, HMC’s operating profit margin expanded to 7.2% in 3Q18 from 5.9% in 3Q17. After its solid fiscal 3Q18 results, analysts’ ratings on Honda are reflecting optimism.

In the quarter ended September 30, 2017, Honda’s operating profits saw a negative impact of costs related to a massive vehicle recall to fix faulty Takata airbags. These airbags also affected automakers (VCR) such as Fiat Chrysler (FCAU), Toyota, and Ford (F).

Continue to the next part to learn what analysts are recommending for Ferrari in March 2018.


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