UPDATE 3-Canon tops Q3 results, bucks yen strength

* Q3 op profit Y104.4 bln vs Y89.5 bln consensus

* Raises full-year outlook by 8 pct to 390 billion yen

* Revises dollar/yen rate assumption to 80 from 90 yen

* Trims full-year sales fcast to 3.71 trln yen from 3.75
trln

* Canon shares down 7 pct ytd vs 11 pct market drop

(Adds fund manager comment, details)

By Isabel Reynolds

TOKYO, Oct 27 (BestGrowthStock) – Canon Inc’s (7751.T: ) strong
quarterly results show the world’s largest maker of digital
cameras is reaping the benefits of cost cuts and managing to
counter the impact of a strong yen.

The shares are expected to trade stronger on Thursday as
the maker of IXY compact cameras raised its full-year profit
outlook on strong sales of office equipment and cameras and
beat forecasts with a 74 percent jump in quarterly profit.

Along with rival camera makers Sony Corp (6758.T: ) and Nikon
Corp (7731.T: ), Canon is fighting a rising yen that is crimping
the value of overseas earnings.

“While the revised forecast is roughly in line with the
consensus, I think these are positive figures because some
expected Canon to keep its outlook given the yen’s gain,” said
Naoki Fujiwara, a fund manager at Shinkin Asset Management.

In the longer term, analysts say Canon may have trouble
expanding sales enough to meet its ambitious 2012 profit goal
of a record profit, which would need to beat the 2007 operating
profit of about 757 billion yen. On Wednesday, Canon shaved 40
billion yen off its full-year sales forecast of 3.75 trillion
yen.

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Analysis on Sony’s ‘EVIL’ cameras [ID:nTOE67803S]

Interview with Canon’s Chairman [ID:nTOE68R07L]

Xerox third-quarter results [ID:nSGE69K0H4]

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Sales of Canon’s EOS digital single-lens reflex (SLR)
cameras, high-end models with interchangeable lenses, struck a
record high for the month in September despite Sony’s attempts
to make inroads into the market with new, lightweight models.

Canon edged up its full-year sales forecast for digital SLR
camera sales for 2010 to 5.7 million from 5.5 million.

“I think shares will rise on this tomorrow, if only
slightly, in comparison with TOPIX (.TOPX: ),” said Ryosuke
Okazaki, senior vice president at ITC Investment Partners in
Tokyo, referring to Canon’s results and the broader share
index.

The results marked the fourth straight quarter of
year-on-year profit growth for Canon.

Sony unveils earnings on Friday and Nikon on Nov. 4.

Profits in Canon’s office equipment business grew 30
percent, while Xerox Corp (XRX.N: ), Canon’s rival in office
equipment, also beat quarterly profit estimates last week,
signaling a rebound in companies’ confidence about spending.
[ID:nSGE69K0H4]

Overall, Canon’s sales grew in all geographical areas
except Japan.

Last month, Chairman Fujio Mitarai said he was keen to
pursue growth via merger and acquisition opportunities in
medical and industrial technology. Mitarai returned full-time
to his post five months ago after a four-year stint as chairman
of Japan’s big business lobby.

YEN WORRY

Canon revised its dollar-yen exchange rate assumption to 80
from 90 yen. Many other Japanese firms had also set their
dollar rate assumptions at 90 yen. The dollar has slumped to
15-year lows and stood at about 81.7 yen (JPY=: ) on Wednesday.

“We don’t think the yen will continue to rise in a
one-sided manner,” said Canon executive vice-president Toshizo
Tanaka. “We think it will stay around the current level of 80
yen. But it will take a while to see a clear economic recovery
in America.”

For the full year to Dec. 31, Canon now expects operating
profit of 390 billion yen ($4.79 billion) versus a previous
forecast of 360 billion yen and just under a consensus forecast
of 396.4 billion yen in a poll of 16 analysts by Thomson
Reuters I/B/E/S.

Canon’s July-September operating profit was 104.42 billion
yen, compared with 59.9 billion a year ago and a consensus
forecast of 89.5 billion yen in a poll of four analysts by
Thomson Reuters I/B/E/S.

Canon shares have fallen about 7 percent so far this year,
compared with an 11 percent fall in the Nikkei average (.N225: ).
Its shares ended 2.3 percent lower on Wednesday in a flat
broader market (.N225: ) ahead of the results.
($1=81.41 Yen)
(Additional reporting by Taiga Uranaka; Writing by Tim Kelly
(Editing by Anshuman Daga)

UPDATE 3-Canon tops Q3 results, bucks yen strength