Think Of Including Honda Motors in Your Portfolio

Honda Motor (HMC) recently released its Q3, 2014 results which were firing all guns. The company was helped by a weak yen to some extent and underperformance in some markets, although revenue increased. Let's see how the results were and what can be expected of Honda in the future.

Performance boost

Owing to favorable foreign currency transformation Honda witnessed a revenue boost and even a rise in unit sales both in automobiles and motor cycle segment. Consolidated net sales increased 16.3% year over year to $22.7 billion, increase by 24% Year over year, but not beat the consensus estimate of 28.95 billion.

Honda witnessed an increase in unit sales in the automobile segment that recorded 900,000 units. Total revenue $22.5 billion fetched from the automobile segments. The company has been unable to benefit from the construction boom in the U.S. as sales of Honda pickups fell were not alarming.

Revenues for the motorcycle segment grew by 30%, recording $3.8 billion. Consolidated unit sales also increased by 13.1% to 2.7 million motorcycles.

Cash flow from the operation also improved in the first 9 months of fisal 2014 recording ¥870.4 billion as against ¥532.6 billion in the first nine months of fiscal 2013. This was mainly due to better sales.

Journey Ahead

The company is optimistic about its performance in the refiscamainder of 2014. Honda projects estimated revenue to increase by 22.5%. It also anticipates an increase in operating income to by 43.2% and net income to step up by 58%. The anticipated growth is based on the fact of Honda's perception of favorable modal index and favorable raw material cost which can influence the bottom line.

Consumers in the U.S. are choosing pickups and SUVs manufactured by the Detroit carmakers such as Ford and General Motors, according to Honda management. The company has been unable to cash in on the trend of growing auto sales in the U.S. The sales drop in Japan is also a matter of concern. But the company expects to benefit from the positive trends in the U.S. by updating its MDX model.

The company is making an effort to cater to the needs of customers and the prevailing market conditions by updating its models and ramping up supply. Revamping the production system, building new plants for increasing production and adopting innovative techniques for upgrading might help Honda to improve capacity and sales during fiscal 2014.

The company is also looking to rescue its sales in Japan and expects better sales in the second half of the year when it releases the Fit compact. Despite the decline in this key market, the company has kept its outlook for the fiscal year intact. Also, the company is looking to increase its deliveries to 6 million units by 2017 has been incurring costs on building the required infrastructure. These efforts should reap benefits in the future but the company will need to offer better models in the lucrative market for pickups in the U.S.

Competitor

Nissan is a Japanese auto manufacturer and another rival of Honda. It is also benefiting from Yen's devaluation. Its sales are gaining strength in the US and its Nissan Leaf is the leading electric vehicle in the nation. Nissan's is also reviving an old brand -- Datsun -- for launch in emerging economies such as India, Indonesia, Russia, South Africa etc. This move should have a positive impact on its sales in the future as the emerging middle class in these markets purchases cars. The first time car buyers in these countries will have an eye on Datsun, since it would ideally suit their budget.

Conclusion

Honda is not among the best automakers but an investor can always consider investing in the company. Considering the fact, that the Board of Honda announced quarterly dividend keeps the interest of the investor covered. The company also expects to make annual dividend of ¥80 per share in fiscal 2014.

Currently 2.00/512345 Rating: 2.0/5 (1 vote)

Voters:

Subscribe via Email Subscribe RSS Comments Please leave your comment:
More GuruFocus Links

Latest Guru Picks	Value Strategies
Warren Buffett Portfolio	Ben Graham Net-Net
Real Time Picks	Buffett-Munger Screener
Aggregated Portfolio	Undervalued Predictable
ETFs, Options	Low P/S Companies
Insider Trends	10-Year Financials
52-Week Lows	Interactive Charts
Model Portfolios	DCF Calculator
RSS Feed	Monthly Newsletters
The All-In-One Screener	Portfolio Tracking Tool

MORE GURUFOCUS LINKS

Latest Guru Picks	Value Strategies
Warren Buffett Portfolio	Ben Graham Net-Net
Real Time Picks	Buffett-Munger Screener
Aggregated Portfolio	Undervalued Predictable
ETFs, Options	Low P/S Companies
Insider Trends	10-Year Financials
52-Week Lows	Interactive Charts
Model Portfolios	DCF Calculator
RSS Feed	Monthly Newsletters
The All-In-One Screener	Portfolio Tracking Tool

HMC STOCK PRICE CHART 35.01 (1y: -9%) $(function(){var seriesOptions=[],yAxisOptions=[],name='HMC',display='';Highcharts.setOptions({global:{useUTC:true}});var d=new Date();$current_day=d.getDay();if($current_day==5||$current_day==0||$current_day==6){day=4;}else{day=7;} seriesOptions[0]={id:name,animation:false,color:'#4572A7',lineWidth:1,name:name.toUpperCase()+' stock price',threshold:null,data:[[1364187600000,38.55],[1364274000000,38.6],[1364360400000,38.79],[1364446800000,38.26],[1364792400000,36.99],[1364878800000,36.62],[1364965200000,37.2],[1365051600000,39.21],[1365138000000,38.6],[1365397200000,39.19],[1365483600000,38.59],[1365570000000,38.96],[1365656400000,39.97],[1365742800000,39.84],[1366002000000,38.9],[1366088400000,39.47],[1366174800000,39.49],[1366261200000,39.1],[1366347600000,39.66],[1366606800000,39.69],[1366693200000,39.9],[1366779600000,40.04],[1366866000000,40.78],[1366952400000,40.39],[1367211600000,40.71],[1367298000000,39.98],[1367384400000,39.19],[1367470800000,39.63],[1367557200000,40.24],[1367816400000,40.08],[1367902800000,40.38],[1367989200000,40.6],[1368075600000,40.28],[1368162000000,40.39],[1368421200000,40.83],[1368507600000,40.7],[1368594000000,41.35],[1368680400000,40.67],[1368766800000,41.41],[1369026000000,41.76],[1369112400000,41.88],[1369198800000,41.27],[1369285200000,40.24],[1369371600000,39.4],[1369717200000,40.05],[1369803600000,38.89],[1369890000000,38.84],[1369976400000,37.57],[1370235600000,37.51],[1370322000000,37.73],[1370408400000,36.79],[1370494800000,36.76],[1370581200000,37.14],[1370840400000,37.32],[1370926800000,36.81],[1371013200000,36.42],[1371099600000,37.44],[1371186000000,36.28],[1371445200000,36.79],[1371531600000,37.06],[1371618000000,36.83],[1371704400000,35.48],[1371790800000,36.67],[1372050000000,35.44],[1372136400000,35.99],[1372222800000,36.41],[1372309200000,37.04],[1372395600000,37.25],[1372654800000,37.54],[1372741200000,38.03],[1372827600000,37.97],[1373000400000,38.34],[1373259600000,37.72],[1373346000000,38.07],[1373432400000,37.89],[1373518800000,38.47],[1373605200000,38.42],[1373864400000,38.63],[1373950800000,38.07],[1374037200000,38.69],[1374123600000,38.85],[1374210000000,38.96],[1374469200000,39.33],[1374555600000,39.03],[1374642000000,38.83],[1374728400000,38.74],[1374814800000,38.08],[137! 5074000000,37.39],[1375160400000,37.42],[1375246800000,37.14],[1375333200000,36.95],[1375419600000,37.99],[1375678800000,37.8],[1375765200000,38.3],[1375851600000,38.4],[1375938000000,38.15],[1376024400000,38.12],[1376283600000,38.83],[1376370000000,38.96],[1376456400000,38.93],[1376542800000,38.56],[1376629200000,38.68],[1376888400000,38.4],[1376974800000,37.55],[1377061200000,36.98],[1377147600000,37.53],[1377234000000,38],[1377493200000,37.6],[1377579600000,37.2],[1377666000000,37.04],[1377752400000,36.66],[1377838800000,35.94],[1378184400000,36.49],[1378270800000,37.08],[1378357200000,37.77],[1378443600000,38.02],[1378702800000,38.83],[1378789200000,38.95],[1378875600000,38.68],[1378962000000,38.37],[1379048400000,38.5],[1379307600000,38.83],[1379394000000,38.67],[1379480400000,39.8],[1379566800000,39.59],[1379653200000,38.9],[1379912400000,38.92],[1379998800000,38.96],[1380085200000,38.76],[1380171600000,39.19],[1380258000000,38.72],[1380517200000,38.14],[1380603600000,38.22],[1380690000000,38.28],[1380776400000,38.07],[1380862800000,38.37],[1381122000000,37.91],[1381208400000,37.96],[1381294800000,39.07],[1381381200000,40.08],[1381467600000,40.12],[1381726800000,40.16],[1381813200000,39.57],[1381899600000,39.95],[1381986000000,40.39],[1382072400000,40.4],[1382331600000,40.47],[1382418000000,40.54],[1382504400000,39.29],[1382590800000,39.78],[1382677200000,39.65],[1382936400000,39.76],[1383022800000,40.22],[1383109200000,40.13],[1383195600000,39.96],[1383282000000,40.1],[1383544800000,40.07],[1383631200000,39.87],[1383717600000,39.9],[1383804000000,39.11],[1383890400000,39.62],[1384149600000,39.76],[1384236000000,40.07],[1384322400000,40.78],[1384408800000,40.93],[1384495200000,41.17],[1384754400000,41.23],[1384840800000,40.97],[1384927200000,41.19],[1385013600000,42.43],[1385100000000,42.7],[1385359200000,42.61],[1385445600000,42.11],[1385532000000,42.02],[1385704800000,42.36],[1385964000000,41.88],[1386050400000,41.52],[1386136800000,41.41],[1386223200000,41.08],[1386309600000,41.94],[13865688000! 00,41.45]! ,[1386655200000,41.3],[1386741600000,40.74],[1386828000000,40.59],[1386914400000,40.35],[1387173600000,39.97],[1387260000000,39.9],[1387346400000,41.44],[1387432800000,40.65],[1387519200000,41.3],[1387778400000,41.62],[1387864800000,41],[1388037600000,41.11],[1388124000000,41.25],[1388383200000,41.22],[1388469600000,41.35],[1388642400000,40.69],[1388728800000,40.69],[1388988000000,40.8],[1389074400000,40.71],[1389160800000,40.65],[1389247200000,40.73],[1389333600000,40.84],[1389592800000,40.22],[1389679200000,40.09],[1389765600000,39.93],[1389852000000,39.93],[1389938400000,39.76],[1390284000000,39.83],[1390370400000,39.72],[1390456800000,38.94],[1390543200000,38],[1390802400000,38.08],[1390888800000,38.06],[1390975200000,38.24],[1391061600000,38.2],[1391148000000,37.51],[1391407200000,36.44],[1391493600000,35.92],[1391580000000,35.97],[1391666400000,35.9],[1391752800000,36.55],[1392012000000,36.48],[1392098400000,36.7],[1392184800000,37.22],[1392271200000,37.02],[1392357600000,36.75],[1392703200000,37.17],[1392789600000,36.6],[1392876000000,36.16],[1392962400000,36.14],[1393221600000,36.12],[1393308000000,36.24],[1393394400000,36.06],[1393826400000,36.4],[1393912800000,36.93],[1393999200000,36.92],[1394085600000,37.3],[1394172000000,37.12],[1394427600000,36.57],[1394514000000,36.89],[1394600400000,36.56],[1394686800000,35.84],[1394773200000,35.47],[1395032400000,35.9],[1395118800000,35.36],[1395205200000,35.2],[1395291600000,35],[1395378000000,35.01],[1395547030000,35.01],[1395547030000,35.01],[1395414056000,35.01]]};var reporting=$('#reporting');Highcharts.setOptions({lang:{rangeSelectorZoom:""}});var chart=new Highcharts.StockChart({chart:{renderTo:'container_chart',marginRight:20,borderRadius:0,events:{load:function(){var chart=this,axis=chart.xAxis[0],buttons=chart.rangeSelector.buttons;function reset_all_buttons(){$.each(chart.rangeSelector.buttons,function(index,value){value.setState(0);});series=chart.get('HMC');series.remove();} buttons[0].on('click',function(e){chart.showLoading();reset_all_buttons();chart.rangeSelector.buttons[0].setState(2);var extremes=axis.getExtremes();$.getJSON('/modules/chart/price_chart_json.php?symbol=HMC&ser=1d',function(data){if(data!=null){var extremes=axis.getExtremes();axis.setExtremes(data[1][0][0],data[1][data[1].length-1][0]);chart.addSeries({name:'HMC',id:'HMC',color:'#4572A7',data:data[1]});if(data[0][1]>=0){display=data[0][0]+" (1D: +"+data[0][1]+"%)";reporting.html(display);}else{display=data[0][0]+" (1