Morningstar

Toyota Earnings: Fiscal 2024 Is Off to a Strong Start, With Revenue Up 24%

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Securities In This Article
Toyota Motor Corp
(7203)

Toyota 7203 started fiscal 2024 with a strong recovery from the semiconductor shortage that allowed EPS to rise 80.3% year over year to JPY 96.74, which beat the JPY 61.81 Refinitiv consensus. We are raising our fair value estimates to JPY 2,500 per share from JPY 2,400 and $171 from $169 on the time value of money, higher equity income, and for the U.S. dollar fair value, a slightly stronger yen to translate our yen model to dollars. Consolidated vehicle volume rose by over 15% to help drive total company operating income up 93.7% and operating margin up 380 basis points to 10.6%. Nearly every geographic market improved, with the exception of a fiercely competitive Chinese market sending equity method income there down JPY 25.4 billion. North American operating margin rose by only 40 basis points to 3.0%, but a new Tacoma due in the third quarter and the recently launched Grand Highlander three-row crossover may help fiscal 2024 margin later.

Management retained full-year fiscal 2024 guidance, which to us implies that Toyota is not overly worried about a U.S. recession or rising interest rates. We are not too worried, either, because auto volumes have been decimated for so long due to the pandemic and chip shortage. We feel that management’s full-year EPS guidance of JPY 190.41 should have been increased because the first quarter’s figure has the company well on its way to beating this number and guidance assumes the yen averages JPY 125 to the dollar. The actual first-quarter rate was JPY 137, and the Aug. 1 spot rate is about JPY 144, so we see more currency benefits for Toyota in the final three quarters of the fiscal year. The quarter saw a JPY 115 billion foreign-currency benefit to operating income, which along with JPY 600 billion from variables such as volume and mix, easily offset JPY 155 billion in net higher costs. Toyota cited “soaring” materials costs that, before JPY 75 billion of cost-reduction efforts, cost the firm JPY 230 billion of operating income.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

David Whiston, CFA, CPA, CFE

Strategist
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David Whiston, CFA, CPA, CFE, is a strategist, AM Industrials, for Morningstar*. He covers stocks in the automotive industry, including dealerships, parts manufacturers, and automakers. He has covered the automotive industry since joining Morningstar in 2007. He writes stock reports, ad hoc reports, stock analyst notes, and builds discounted cash flow models for each company covered. He also assesses their economic moat and makes frequent television and print media appearances in local, national, and international news outlets. Key stocks covered include GM, Ford, CarMax, and all six publicly traded franchise auto dealers, such as AutoNation and Penske Automotive Group.

Before joining Morningstar in 2007, Whiston spent four years in PricewaterhouseCoopers’ New York real estate audit practice and one year in its Chicago office working on real estate acquisition due diligence, gaining experience around assessing an asset’s cash flow.

Whiston holds a bachelor’s degree in business administration with a concentration in accounting from the University of Richmond’s Robins School of Business. He also holds a master’s degree in business administration with concentrations in finance, economics, and organizational behavior from the University of Chicago Booth School of Business. He holds the Chartered Financial Analyst® designation, and he is a Certified Public Accountant and a Certified Fraud Examiner.

In 2012, he ranked first in the specialty retailers and services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey. He ranked first in the same industry in 2011 .

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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