Toyota Reports 15% y-o-y Increase in Vehicle Sales

Toyota Reports 15% y-o-y Increase in Vehicle Sales

The stock of Toyota Motor Corporation (NYSE: TM) has appreciated by nearly 10% in the past month and is currently trading near its 12-month high of $123.18. The Japanese auto manufacturer had posted 1Q18 net income of ¥613.06 billion ($5.52 billion), or ¥202.84 ($3.65 per ADR) per share, on revenues of ¥7.05 trillion ($63.51 billion). Both earnings and revenues exceeded analysts’ estimates. That has been keeping the stock in a bullish trend. We expect the rally to continue on the basis of strong September sales figures released last week. The stock of Toyota closed Monday’s trading session at $121.67.

Last Thursday, all the major US automobile manufacturers reported a strong sales gain in September, mainly due to an increase in demand for pickups and SUVs. While General Motors continued to lead the pack, Toyota impressed markets with a 15% y-o-y increase in US sales, and exceeded Bloomberg’s estimate of a 9.3% growth. The figures posted by Toyota are the largest y-o-y increase in US sales reported by any major automaker.

Toyota also surpassed the sales of Ford Motor Co. for the third consecutive month and secured the second place in the US sales ranking for September. Overall, sales of automobiles were 1.52 million vehicles, up 6.1%, compared with last year. Despite the strong sales in September, the US auto industry may not reach the record sales of 17.55 million vehicles in 2016.

Over the last one year, Toyota had been ramping up production of its compact RAV4 and mid-size Highlander crossovers, and is benefiting from it now. The sales of Highlander jumped 36% in September to over 20,000 vehicles. Likewise, the sales of RAV4 rose 44% to 42,000 vehicles. Toyota’s pickup truck, Tundra, which has a loyal client base, sold 11,000 units, up 17% on y-o-y basis. Tacoma, the popular pickup truck of Toyota in the US and worldwide, sold 18,000 units, up 15% in September.

What differentiates Toyota and other major manufacturers who have reported a sharp rise in volumes is the average incentive spent per vehicle to boost sales. TrueCar has estimated that Toyota spent an average of $2,786 per vehicle in September. The average transaction price of Toyota is $30,786. That means, Toyota spent about 9% on the average transaction cost as incentives. Its rivals are spending more than 10% of average transaction prices. In fact, the amount spent by Toyota on incentives is almost half of 16.3% and 17.2%, respectively, spent by Nissan and Kia. Following the strong rise in sales volumes, Citigroup upgraded the stock of Toyota Motor from “neutral” to “buy” rating. Thus, on the basis of facts provided above, we expect the stock to remain in an uptrend for the short-term.

As the price chart indicates, the stock is trading above its 50-period triple exponential moving average. Furthermore, the Schaff trend cycle is moving upwards. Thus, we expect the stock to remain in an uptrend, as of now.

Toyota - Technical Analysis - 10th October 2017

We may establish a binary option trade based on the above analysis. Before purchasing a call option, we will make sure that the contract remains active for a week and the stock is trading near $121.50 in the equity market.

Disclaimer: The trading analysis offered here is our opinion. It is not provided as trading advice, merely an indication of our trading plan. We cannot guarantee success and we encourage traders to incorporate a strong money management strategy to limit losses. Please use this article as part of your own research before formulating strategies prior to trading.

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