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TheStreet Open House

Toyota Surge Hurts Every Other Automaker: Analyst

DETROIT ( TheStreet) -- Toyota's (TM) 87% U.S. sales gain in May is just the start for the automaker, which has new products galore and is poised for a strong performance over the next several years.

Toyota's comeback means problems for every other automaker in the U.S., said Polk analyst Tom Libby. "Toyota had a huge May and they have a whole bunch of new products coming," Libby said.

The gains followed two years of problems due first to quality issues and then to inventory issues.

Toyota is likely to take back the lead from Ford (F) as the No. 2 U.S. automaker, he said, and Hyundai's gains may stall as well. It is worth noting that "Toyota's gain in May was equal to the entire U.S. volume of the Hyundai make in the same month," Libby wrote, in a recent blog.

During May, Toyota's market share rose to 15.2%, up a remarkable five points from 10.2% in the same month a year earlier. Honda (HMC) had a 1.5 point gain and Chrysler had a gain of 0.3 points. The remaining top four automakers all showed declines, with GM (F) down 2.4 points and Ford down 1.8 points.

The May surge meant that Toyota's full-year sales for the first five months are up 23.7%, behind only Chrysler among the top seven. Camry was the No. 2 U.S. vehicle after a 110% sales gain, while Corolla was fifth with an 87.5% gain. The trends will continue even if the gain, partially due to unusually high fleet sales, diminishes, Libby said. Not only are Ford and GM (GM) threatened, but Hyundai and Kia are also vulnerable after continuing gains over the past few years, he said.

Hyundai and Kia "have brought a steady stream of competitive, attractive products to the market, while Toyota has been down for two years," Libby said. The two have racked up big gains selling mid-sized cars, a market where Toyota has long had a strong presence.

Unfortunately, Toyota's strong sales gains don't necessarily translate into huge gains for shareholders. S&P Capital IQ analyst Efraim Levy has a hold on Toyota shares, which are already up about 14% for the year after closing Monday up 35 cents to $76.85. Levy has a target price of $86 and wrote in a recent note that "sales and profits should be restrained by the strong Japanese yen." The target price reflects a multiple of 14 times Levy's fiscal year 2013 earnings estimate of $6.14 a share.

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