Honda Vs. Toyota Ahead Of Earnings

When it comes to car sales in the United States, Toyota (TM) and Honda (HMC) are the top two foreign manufacturers in terms of sales. Ford is the top seller, Toyota is second, Chevy is third, and Honda is fourth in terms of all companies. The friendly rivalry between Honda and Toyota goes back many decades and it goes back to their early days in Japan. Now the two rivals are set to report fiscal Q4 results within days of one another. Toyota is set to report on May 12 and Honda will report on May 14.

If we break down the two stocks using all three analysis styles, I believe there is a clear winner, but it’s a close race.

Starting with the fundamental analysis and using the Tickeron fundamental analysis screener, Toyota gets positive marks in five categories and one negative mark. Honda gets three positive marks and two negative marks.

The positive marks for Toyota are the valuation rating, the profit vs. risk rating, the SMR rating, the P/E growth rating, and the seasonality score. The lone negative mark is the outlook rating.

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HMC vs. TM Tickeron.jpg

Honda gets positive scores for its valuation rating, the SMR rating, and the seasonality score. The negative scores are in the outlook rating and the profit vs. risk rating.

Honda did post better earnings growth in Q3 with a jump of 161%, but it has seen earnings decline by 28% per year over the last three years. Toyota saw earnings increase by 57% and over the last three years the EPS has declined by an average of 16% per year. Honda’s earnings are expected to increase by 12% for 2021 as a whole while Toyota’s are expected to increase by 11%.

Toyota’s sales increased by 13% in the third quarter while Honda’s only increased by 6%. Over the last three years, Honda’s sales have declined by 4% per year while Toyota’s have declined by only 2% per year.

In terms of the profitability measurements, neither company gets great scores, but Toyota has better measurements on both its return on equity and its profit margin. The ROE is 9.1% compared to Honda’s 5.7%. Toyota’s profit margin is 8.5% and Honda’s is only 5.3%.

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