Evidence is mounting that the global auto market is not only in recovery, but is in fact growing significantly. Several US automakers are enjoying rising sales in domestic as well as international markets, but growth from the number one Japanese car maker looks even more impressive. Toyota Motor Corporation (ADR) (NYSE:TM) delivered excellent results this week, benefited in part from a weaker yen. Let’s take a closer look at these impressive figures.
Rising Sales and Income
The full-year results are even more formidable. Operating income was up a staggering 271.4% compared to fiscal 2012, and net income was up nearly 240%. Net revenue for the full-year increased 18.7%, which together with the income figures, points to increased operating efficiency within the company.
The company credited the weaker yen with some $1.5 billion of its operating income increase, and cost cutting initiatives with around $4.5 billion. Management stated it is committed to producing ever-better cars, and reforming its manufacturing technologies to maintain its competitive edge. The outlook for 2014 is good, as the company expects to maintain its excellent performance through the fiscal year.
Increased Competition
While Toyota Motor Corporation (ADR) (NYSE:TM) is for now still the world’s leading producer of cars, it is facing stiff competition from Asian as well as US competitors. Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) have both been reporting substantially higher sales, as car makers worldwide are fighting for market share in the faster growing emerging markets. Ford reported an 18% sales increase for Q1 2013, its best results since 2007. The company’s fuel efficient offerings saw especially strong demand with record sales, and pickup trucks have also been doing well. The company’s sales figures in China are impressive, with a 54% increase in the country.
General Motors Company (NYSE:GM), another major US competitor, has also been thriving in the Chinese market. The company, whose brands include Chevrolet, GMC and Opel, recently became the largest automaker in China, with a market share of around 15%. For its latest report, the company announced it had sold 3.6% more vehicles compared to the same period a year earlier, but on the other hand saw its revenue as well as its income decline. Despite this, the stock rose several percentage points following the report.
Valuations and Metrics
Toyota Motor Corporation (ADR) (NYSE:TM) is a fair bit more expensive than its competitors, which is apparently the premium the market is willing to pay for the company’s strong performance. It currently trades at 18.81 times trailing earnings, which is considerably higher than Ford Motor Company (NYSE:F)’s 9.62 and GM’s 10.86. The forward P/E is quite a bit lower though at around 13. The company’s operating margin of around 5% is on par with that of Ford and quite a bit higher than GM’s 1%. Looking at the balance sheet, Toyota has some $35.5 billion in cash and a debt load of around $165 billion. This gives it a fairly high total debt to equity ratio, but this is not unusual for car makers. Finally, it has an operating cash flow of nearly $31 billion.
The Bottom Line
Car sales seem to be increasing worldwide, with US as well as Asian car makers reporting strong sales. However, Toyota Motor Corporation (ADR) (NYSE:TM) seems to be growing a lot faster than the competition, helped in part by a weaker yen and the company’s cost cutting measures. On the back of these figures, the company expects its strong performance to continue in fiscal 2014. While the stock isn’t exactly a bargain at the moment, one could expect further upside based on these strong results and encouraging outlook.
The article Another Great Quarter for the World’s No. 1 Automaker originally appeared on Fool.com and is written by Daniel James.
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