You’d never know it by looking at the stock prices of
General Motors
or
Ford Motor,
but the traditional car business is just fine. Just look at
Toyota
Motor.
Investors in search of additional reassurance should note that Toyota is also investing more in battery electric vehicles—an area Ford and GM investors have become wary of lately.
Tuesday morning, Toyota reported an operating profit of $11.3 billion for its fiscal third quarter. Wall Street was looking for $9.2 billion, according to FactSet.
What’s more, Toyota raised its operating profit guidance to about $33 billion from $30 billion for its full fiscal year ending in March. That implies about $4.4 billion in fiscal fourth-quarter operating profit. While that is a little lower than Wall Street expects, the first calendar quarter of the year is typically weak for auto makers. Overall, it’s tough to argue with Toyota’s latest earnings report and the overall profit picture it paints.
Toyota’s U.S.-listed American depositary receipts surged 8.1% to $219.50 in Tuesday trading, while the
S&P 500
was flat and
Nasdaq Composite
was off about 0.3%. If the ADR closes at these levels, it would be a record, based on available data back to March 15, 1982, according to Dow Jones Market Data.
However, for the full fiscal year, Toyota actually expects to sell fewer vehicles than it once did. Unit sales for fiscal year 2024 are expected to be about 9.5 million units, down from a prior forecast of 9.6 million. Electrified sales, including all hybrids and battery electric vehicles, are expected to be 3.9 million units.
That number is essentially unchanged. Most of the electrified vehicles Toyota sells are hybrids that don’t plug in.
Toyota expects to sell less than 120,000 all battery electric vehicles in its fiscal year up from just 38,000 in fiscal year 2023. Still, that accounts for just 1% of the total volume. The mix of vehicles is changing slowly at Toyota.
The company also announced a $1.3 billion investment in its Kentucky assembly plant, which will eventually produce a three-row all-electric SUV for the North American market.
Despite the slightly lower sales outlook, per-unit profitability remains strong. With Tuesday’s gains, Toyota stock trades for about 10 times estimated calendar year 2024 earnings. What’s more, through early trading, shares were up about 50% over the past 12 months.
GM and Ford investors should perhaps share in Toyota shareholders’ joy. GM and Ford stocks were down about 7% and 10%, respectively, over the past 12 months. GM shares trade for 4.3 times estimated 2024 earnings. Ford stock trades for 6.6 times.
It’s tough to blame the U.S. companies for that performance, when the U.S. car market is fine: U.S. car sales rose about 11% in 2023 and are expected to be up slightly in 2024.
All GM did recently was provide 2024 financial guidance well above the Street. It expects to generate about $13 billion in 2024 operating profit, compared with a consensus estimate of $11 billion. Ford reports fourth-quarter earnings Tuesday evening.
Things just aren’t all that bad for car makers these days, but try telling that to Ford and GM shareholders.
Write to Al Root at [email protected]
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