This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Toyota Crushed Earnings, but Faces Headwinds

NEW YORK (TheStreet) -- Shareholder reaction is mixed after the world's largest automaker, Toyota Motors (TM - Get Report), reported record earnings. Profits soared 90% to almost $18 billion for fiscal-year 2014, ended March 31. Japan sales added to the company's profit this year. Vehicle sales increased 16% from fiscal 2013.

Despite strong top- and bottom-line numbers from North America, delivering a profit from Japanese sales has been largely allusive for years. Toyota's domestic profitability may be short-lived, though. Last month, Japan raised the national sales tax from 5% to 8% and as a result, the company expects to sell 165,000 fewer cars this year. Drivers wanting to lock in the lower sales tax rate before April helped fuel domestic demand and likely pushed forward some sales that would have happened during fiscal year 2015.

The primary catalyst catapulting profits comes from Japanese Prime Minister Shinzo Abe. Abe has aggressively stimulated manufacturing and exporting through policies collectively known as Abenomics. As a result of Abenomics, the Japanese Yen has declined almost 20% in the last two years against the dollar.

>>Read More: How to Trade Earnings, Including CBS and Monster Beverage

>>Read More: Groupon and Twitter Among 7 Stocks Taken to the Woodshed

That explains why profits can climb 90% while vehicle sales are more modest. Looking forward, Toyota expects sales to remain at this level with estimated fiscal-year 2015 sales of 9.1 million vehicles, and a slight profit decline to about $17 billion. The current year's profit headwinds include two significant recalls impacting the Camry, Corolla, Matrix, Highlander and 23 other models.

TM PE Ratio (Forward) Chart

On a comparative basis, Shares in Toyota are selling at a forward earnings discount in relation to General Motors (GM), Ford (F) and of course, Tesla (TSLA). The company pays a decent dividend yield of 2.1%. For investors wanting worldwide economic exposure, Toyota is a suitable candidate.

China is a problem, or at least a significant challenge for the company. Older Chinese remember atrocities committed by Japanese troops on family members during World War II. China's recent flexing of its regional influence is straining the relationship between China and Japan. Volkswagen and GM have the strongest brands in China, and it will be difficult for Toyota to capture the lead from them.

I like Toyota as a buy-and-hold dividend play, but investors may want to turn their sights toward GM or F instead.

At the time of publication, Weinstein had no positions in securities mentioned, although postions may change at any time.

Follow @RobertWeinstein

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
TM $142.40 0.00%
AAPL $123.25 0.00%
FB $83.30 0.00%
GOOG $548.34 0.00%
TSLA $185.00 0.00%

Markets

DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs