Toyota's (TM) records impressive 3Q performance

Toyota’s (NYSE: TM) 3Q operating profit reached ¥1.68 trillion with an operating profit margin of 14%, surpassing market expectations. The robust performance was driven by strong sales of high-margin vehicles, particularly hybrid electric vehicles (HEVs), which saw a YoY increase of 46%. Improved earnings per vehicle also contributed to the positive results.

Toyota considered the impact of scandals at group companies, including associated compensation, in its Q4 projections. The company expressed confidence that even if production did not resume by March, it could still achieve its full-year operating profit target of ¥4.9 billion. Despite inventory and incentives increasing in the US market, the firm is experiencing low stock levels in HEVs.

Looking ahead, the expansion of the HEV ratio is expected to bolster earnings. Regarding group cross-shareholdings, Denso has reduced its holding ratio to 20%, while other firms are making independent decisions, possibly without reducing their ratios. Toyota indicated its intention to advocate for reconsideration in this area.

The outcomes indicate a potential upward revision in the FY3/25 consensus.

Despite the company's primary focus on solidifying its market position, there is a noticeable and urgent demand for hybrid electric vehicles (HEVs). It appears that Toyota has the capacity to increase FY3/25 production by 2%-3% to meet this heightened demand for HEVs.

It appears that Toyota has the capacity to increase FY3/25 production by 2%-3% to meet this heightened demand for HEVs. Given the strong demand for HEVs, Toyota is likely to maintain control over sales incentives. Analysts at Citi research believe the remarks regarding cross-shareholdings are expected to bring relief to suppliers.

Shares of TM are up 3.7% in pre-market trading Tuesday morning.

By Michael Elkins | [email protected]

You May Also Be Interested In

• Synopsys upgraded at Piper Sandler on Intel foundry momentum, Apple opportunity
• BofA lists top 5 themes driving next $1tn in incremental semi sales
• Morgan Stanley Starts Adani Enterprises Ltd. (ADE:IN) at Overweight