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What to Expect from Toyota's (TM) Q1 Earnings

Zachary Stutler

Toyota Motor TM is expected to report its Q1 2020 earnings on Friday, August 2. TM stock has climbed over 13% in 2019 to outperform the broader auto market. Now the question is can Toyota keep this momentum going.

Overview

Based in Japan, Toyota is one of the largest auto manufacturers in the world, ranking second based on global sales. The company owns a number of brands, including Lexus, as well as significant stakes in multiple other companies such as Subaru Corporation FUJHY and Mazda MZDAY.

Toyota is one of the preeminent sellers of hybrid vehicles worldwide. Both its Lexus and Toyota brands have popular hybrid options. The Toyota Prius was the first mass-produced hybrid vehicle when it launched in 1997. It later became one of Toyota’s biggest success stories, consistently being the best-selling hybrid car on the market, until 2019 when the Ford Fusion F overtook it. It’s also important to note that the Toyota RAV4 Hybrid and Toyota Camry Hybrid are also popular as part of an expansive portfolio. The Prius along with these other models help Toyota to stay competitive against other companies such as Tesla TSLA and Volkswagen VWAGY.

 

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Currently, shares of TM are trading at a P/E of 8.44, which falls below its industry’s 9.45 average. Historically, Toyota’s P/E has hovered closer to its industry than it currently does which could suggests that the stock is relatively undervalued at the moment. Toyota paid an annualized dividend of $3.50 in fiscal 2019, and currently sports a yield of approximately 2.7%.

Q1 Outlook & Earnings Trends

In Q1, Toyota is expected to report $67.96 billion in revenue, according to our Zacks Consensus Estimate. This would mark a 0.66% year-over-year gain. This quarter is expected to continue a general trend of revenue growth since fiscal 2016. Looking further ahead, revenue is expected to grow 1.98% in fiscal 2020 and then a further 2.59% in fiscal 2021, with fiscal 2020 revenues projected to reach $285.30 billion.

 

Toyota expects its fiscal 2020 consolidated vehicle sales to be 23,000 higher than fiscal 2019, primarily driven by increased sales in Europe and Asia, excluding Japan.

Meanwhile, Toyota’s EPS is expected to decline in Q1 by 4.66%. Although Q1 EPS could mark a bad start to fiscal 2020, the coming periods appear stronger. Full-year fiscal 2020 earnings are expected to be $15.31 a share, 30.63% higher than fiscal 2019. Investors should pay close attention to any updated full-year earnings guidance.

Over the trailing four quarters, Toyota has not done well in its earnings reports. It has averaged negative surprise of 15.96% and missed earnings expectations by 26% last quarter. This poor performance has caused the stock to fall following the reports three out of the last four quarters.

Bottom Line

Toyota’s hybrid and electric vehicle development will be vital to the firm’s future growth as the industry shifts in that direction. If Toyota can continue selling popular electric and hybrid vehicles it will have a major advantage over its competitors because it already has a strong foothold hybrid and EV market.

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