INSTANT VIEW: Toyota Motor Q4 results, 10/11 forecasts

TOKYO (BestGrowthStock) – Toyota Motor Corp (7203.T: ) beat forecasts with a fourth-quarter profit (Read more your timing to make a profit.) as it cut costs and its aggressive sales incentives swiftly drew U.S. customers back to showrooms after its worst recall crisis.

But it forecast a smaller-than-expected 90 percent rise in operating profit for the year to end-March 2011, in a sign of lingering caution as the world’s biggest automaker faces rising raw material prices and questions over demand as government subsidies fade.

Following are initial reactions of analysts and investors:

HIROAKI OSAKABE, FUND MANAGER, CHIBAGIN ASSET MANAGEMENT, TOKYO

“The forecast is really quite weak compared to the consensus, but given their overall situation right now I don’t think they could really put out a strong forecast. They also see the euro rate for the next year (averaging) 125 and their forecast for global vehicle sales is really very conservative.

“Overall, this was quite conservative. I think the real impact of the recalls has already been factored in, but the consensus was also pretty high. I think there could be some selling of shares by people who bought Toyota in expectation of the results.

“I think it’s not really an issue of whether Toyota will do better than GM or Ford. After all, when you consider regular gasoline cars — not hybrids — the gasoline use of Japanese cars is quite good. There definitely was some damage to the brand image and Toyota really had to drop prices, but it’s not as if there was any big drop in quality.

“The biggest risk that I see for the next year isn’t just limited to Toyota, it’s really more whether the global automobile market will hold up once all the rebate schemes expire. I think the impact of the recalls has been factored in for Toyota, the risk now will be much more of a macro one.”

EUN-YOUNG YIM, ANALYST, DONGBU SECURITIES, SEOUL

“Foreign exchange rates will be a key risk to Toyota this year. Europe’s debt problems have made the yen stronger again, which will likely slow the pace of earnings recovery at Toyota.

“Toyota has a smaller global production ratio than Hyundai’s at the early end of 40 percent and over 50 percent, respectively. That leaves it more vulnerable to forex fluctuations than Hyundai.

“But Toyota’s earnings will make a big improvement this year thanks to the effect of transferring into income part of the provisioning costs it set aside last year to protect against the falling residual values of vehicles.”

KOJI ENDO, SENIOR ANALYST, ADVANCED RESEARCH JAPAN, TOKYO

“The fourth-quarter profit (Read more your timing to make a profit.)s were slightly better than expected, while the forecast for this financial year is slightly weaker than expected.

“Their forecast for this year is very conservative. Looking at a regional breakdown of their sales forecast, they cut Japan sales sharply, which suggests they assume sales will plummet after the government’s incentive scheme ends in September.

“I suspect analysts will forecast much higher profits of around 400 to 500 billion yen. The company’s forecast reflects the least it thinks it can achieve.”

“But this is unlikely to boost share prices. At the moment, there’s no reason to buy Toyota.”

MARKET ACTION:

Toyota shares closed down 0.7 percent at 3,495 yen ahead of the results announcement.

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(Reporting by Tokyo Newsroom)

INSTANT VIEW: Toyota Motor Q4 results, 10/11 forecasts