A higher mix of less profitable vehicle sales led to a 0.8% revenue slip for this company during the most-recent quarter
The firm is looking to streamline operations as it capitalizes on higher sales in Japan and elsewhere in Asia.
The stock trades at just 9.2 times the company’s 2020 earnings forecast.
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HONDA MOTOR CO. LTD. (ADRs), (New York symbol HMC; www.honda.com) is Japan’s second-largest carmaker after Toyota, and the world’s biggest motorcycle manufacturer.
The company sold 2.56 million cars in the six months ended September 30, 2019. That’s up 0.4% from a year earlier. Higher sales in Japan (up 9.6%) and elsewhere in Asia (up 2.1%) offset drops in North America (down 1.9%), Europe (22.5%) and other regions (11.5%). Motorcycle sales also fell 6.1%, mainly due to weaker demand in India.
Honda’s overall revenue for the six months declined 0.8%, to $70.9 billion from $71.5 billion. Earnings per ADR (each American Depositary Receipt equals one share) dropped 18.0%, to $1.92 from $2.34. That’s because the company sold a higher mix of less-profitable vehicles.
Still, the company continues to streamline its models. That makes it easier to share parts and lower costs—both of which benefits consumers and Honda investors.
Value Stocks: Dividend adds to the bargain share price appeal
The company now plans to close its only plant in the U.K. in 2022. That facility makes the hatchback version of its popular Civic model.
The closure is largely due to declining demand for diesel-powered cars. Uncertainty surround the terms of the U.K.’s planned departure from the European Union likely also contributed to the decision.
Honda has yet to reveal how much it expects to pay in severance and other costs.
The company will probably earn $3.15 per ADR in 2020; the ADRs trade at a low 9.2 times that estimate, which makes them attractive for investor new buying. A high $1.01 dividend yielding a high 3.5% yield only adds to the appeal of these ADRs.
One has to be careful on ADRs as they can attract a higher than 15% withholding tax depending on the tax treaty between Canada and the home country of the stock.also, if you are filing a T1135 (foreign securities), then you have to breakout your foreign holdings by country which is a bit of a pain unless you get a brokerage statement that does it for you.
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One has to be careful on ADRs as they can attract a higher than 15% withholding tax depending on the tax treaty between Canada and the home country of the stock.also, if you are filing a T1135 (foreign securities), then you have to breakout your foreign holdings by country which is a bit of a pain unless you get a brokerage statement that does it for you.
Thanks, Chris, for sharing your insights with our readers.