NEW YORK (TheStreet) -- Shares of Honda Motor Co. (HMC - Get Report) are down 4.1% to $31.07 in pre-market trading after it was reported that the National Highway Traffic Safety Administration will examine whether Honda failed to report deaths or injuries involving air bags that are now part of a sweeping federal review, according to Reuters.
Regulators gave Honda three weeks to answer detailed questions about how it sought and logged accident reports for more than a decade. Yesterday's order, which includes 34 points, must be answered under oath.
"Honda and the other automakers are legally obligated to report this information to us and failure to do so will not be tolerated," NHTSA Deputy Administrator David Friedman said in a statement.
U.S. law requires that automakers submit to the NHTSA on a quarterly basis so-called Early Warning Reporting data on every incident where they have received information about a death or injury involving their vehicles that might have been caused by a defect, Reuters said.
Honda said that it had contracted a third-party audit of potential inaccuracies "and will soon share our findings" with NHTSA.
TheStreet Ratings team rates HONDA MOTOR CO LTD as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate HONDA MOTOR CO LTD (HMC) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- HONDA MOTOR CO LTD' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, HONDA MOTOR CO LTD increased its bottom line by earning $3.10 versus $2.17 in the prior year. This year, the market expects an improvement in earnings ($3.33 versus $3.10).
- The debt-to-equity ratio is somewhat low, currently at 1.00, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.77 is somewhat weak and could be cause for future problems.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Automobiles industry and the overall market on the basis of return on equity, HONDA MOTOR CO LTD has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- HMC, with its decline in revenue, slightly underperformed the industry average of 10.4%. Since the same quarter one year prior, revenues fell by 14.9%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, HMC has underperformed the S&P 500 Index, declining 23.63% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it is one of the factors that makes this stock an attractive investment.
- You can view the full analysis from the report here: HMC Ratings Report