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Toyota’s Cost-Reduction Efforts Paid Off Well in Fiscal 2018

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Toyota’s Cost-Reduction Efforts Paid Off Well in Fiscal 2018 PART 1 OF 9

How Investors Are Reacting to Toyota’s Fiscal 2018 Earnings

Toyota’s fiscal 2018 earnings

The largest Japanese automaker, Toyota Motor Corporation (TM), released its fiscal 2018 results for the period from April 1, 2017, to March 31, 2018, on May 9. The company’s adjusted EPS (earnings per share) for the fiscal year stood at 842 Japanese yen, or ~$7.67, 39% higher than its adjusted EPS of 605.5 Japanese yen in fiscal 2017.

Before we dig deeper into Toyota’s fiscal 2018 earnings results, let’s take a quick look at how investors are reacting.

How Investors Are Reacting to Toyota’s Fiscal 2018 Earnings

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Positive sentiments

On the day of its fiscal 2018 earnings release, Toyota’s ADR (American depositary receipt) fell 4.1% from the closing of the previous session to $136.29. However, since then, the ADR has remained mixed, with minor gains of 0.8% as of May 16.

The company’s higher net profit, stronger profit margins due to favorable currency movements, and cost-reduction efforts could be the primary reasons for investors’ initial positive reaction. In contrast, Toyota’s dismal fiscal 2019 guidance could be worrisome.

In the first quarter of 2017, the fight between the bulls and bears continued on Wall Street. In the quarter, the S&P 500 Index delivered a -1.2% return. During this quarter, Toyota yielded a positive return of 2.5%.

As of May 16, Toyota’s ADR has risen 8% YTD (year-to-date). In comparison, other US auto giants (IYK) General Motors (GM) and Ford Motor Company (F) fell 7.2% and 7.7%, respectively, YTD.

Italian-American auto giant Fiat Chrysler Automobiles (FCAU) has risen ~24.9% so far in 2018. FCAU’s consistently improving margins and debt condition could be two key reasons for the optimism in its stock.

Series overview

In this series, we’ll take a closer look at Toyota’s fiscal 2018 revenue and profitability. We’ll find out what factors drove the company’s earnings for its fiscal year. We’ll also see how the company is expecting its fiscal 2019 to be. Toward the end of the series, we’ll take a look at some important factors that may drive Toyota’s valuation in the coming quarters.

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