TOKYO (Reuters) - Honda Motor Co., Japan's third-biggest automaker, posted a better-than-expected 24 percent jump in quarterly operating profit Tuesday, helped by soaring revenues and a weaker yen, and jacked up its full-year forecasts to account for currency and other one-time windfalls.
Most of Japan's top auto makers are expected to report strong profit gains as they ride a softer yen and expand their sales worldwide, most notably in North America at the expense of General Motors Corp. (Research) and Ford Motor Co. (Research)
GM, the world's top-selling automaker, last week reported a $4.8 billion fourth-quarter net loss as costs of layoffs and plant closures soared. Ford, also going through a sweeping restructuring, fared better with a 19 percent rise in earnings.
Analysts expect Honda, also the world's top motorcycle maker, to speed ahead in the United States with new products such as the CR-V and Acura MDX in the growing crossover segment -- for cars that look like sport/utility vehicles but are built on a more economical car platform -- as well as the popular Civic sedan that was remodeled late last year.
For the year to the end of March, Honda lifted its operating profit forecast by 27 percent to a record ¥860 billion ($7.31 billion) to include a ¥128 billion gain related to the return of the proxy portion of its pension funds to the government.
The new figure would represent a 36 percent improvement on last year and exceeds the market's consensus forecast of ¥696 billion, even without the pension-related add-on.
It boosted its net profit forecast to ¥605 billion from ¥490 billion.
While investors could take a cue from the rosier projections, one analyst said the revised amount was based solely on the pension gains and Honda's new assumptions for more favorable exchange rates rather than on a better sales performance.
In fact, Honda now expects to sell fewer motorcycles and power products during the business year than it reckoned three months ago. It kept its forecast for total car sales unchanged.
"Despite how it may look at first glance, it's not necessarily a hugely upbeat result," said CSFB auto analyst Koji Endo, adding that Honda's fundamentals remained firm.
Better days for domestic market
Opening the sector's earnings season, Honda booked an operating profit of ¥194.99 billion ($1.66 billion) for the October-December third quarter, beating a consensus estimate of ¥187 billion in a survey by Reuters Estimates.
Quarterly car sales expanded in North America, fell in Asia and were flat in Europe, but revenue grew in all three regions thanks to a weaker yen. U.S. operations were also helped by a drop in spending on profit-eroding sales incentives.
The domestic Japanese market remains a weak spot, but Honda -- and analysts -- said sales could turn up after March, when the auto maker brings together its three sales channels to make all its cars available at each showroom.
"We're expecting a year-over-year rise during the final quarter," Honda Executive Vice President Satoshi Aoki told a news conference, referring to domestic sales.
Analysts have said Honda's Chinese operations could also improve as pressure eases on pricing competition for the industry.
Third-quarter net profit fell to ¥133.15 billion, down 12 percent from a year earlier, when Honda had booked one-time valuation gains. Derivatives losses from currency hedging also hurt. Revenues grew 16 percent to ¥2.472 trillion.
Shares in Honda, valued at more than $52 billion, rose 4.8 percent in October-December, underperforming an 18.7 percent gain by the Nikkei average and the transport sector's 12.3 percent rise.
Honda closed up 1.37 percent at ¥6,660 on Tuesday ahead of the results.
Providing more fodder for a rise, Honda said it planned to cancel 11 million of its treasury stock, or 1.18 percent of its outstanding shares, on Feb. 7. In addition, it plans to buy back up to 5.8 million of its own shares by April 14.
Quarterly results are due from Japan's second-ranked auto maker Nissan Motor Co. Ltd. on Thursday and from top-ranked Toyota Motor Corp. on Feb. 7.
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