TM Toyota Motor Corporation

   (FROM THE WALL STREET JOURNAL 11/2/15) 
   By Yoko Kubota 

Japan's top three auto makers are expected to announce a rise in quarterly profits this week, as investors closely watch the companies' vehicle sales forecasts to gauge the health of the world's two biggest vehicle markets.

Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co. have been boosted by solid July-September sales in the U.S., their biggest market, where autos are being bought at the fastest pace in 15 years. But investors are hoping for signs that a decline in sales in China, amid an economic slowdown that has squeezed consumer spending, has bottomed out.

The three companies have had varied performances in China, where car sales fell year-over-year for three months in a row before growing again in September. Toyota and Honda have been outperforming the sluggish car market in recent months, while Nissan sales have been dragged down.

Some analysts say that Toyota and Nissan could raise their full-year profit forecasts. Whether the Japanese auto makers will raise or cut their full-year vehicle sales forecasts for China and the U.S., as well as the outlook from executives on marketwide demand for the coming months, will give an indication of how confident auto makers are about the two main markets that account for more than one-third of global auto sales.

Toyota is heading into its third-straight year of record annual profit, having outsold Volkswagen AG and General Motors Co. in global vehicle sales for the nine months to September.

Volkswagen's recent diesel scandal also might dent sales for the German auto maker and give a boost to its Japanese rivals, although overlaps are limited between their key markets and products.

Overall, strong U.S. sales and a weak yen are likely to contribute to quarterly profit growth at the Japanese auto makers. Analysts polled by Thomson Reuters expect Nissan's second quarter profit to rise 5% from a year earlier to 132 billion yen ($1.1 billion). For Honda, quarterly net profit is likely to grow 7% to 129 billion yen, while for Toyota, net profit is expected to increase 14% to 614 billion yen.

Demand in the U.S. for sport-utility vehicles and pickup trucks has been vigorous, and some analysts expect overall U.S. sales to reach 17.4 million vehicles in 2015, the highest annual volume since 2000.

The yen is trading at roughly 120 against the dollar, weaker than the top three auto makers' assumed full-year yen rate against the dollar at between 115 and 117. Generally, a weaker yen boost profits from overseas.

For Toyota and Nissan, there is a lag of one quarter in incorporating China-related figures in the companies' earnings, because of accounting methods. Their second-quarter reports will reflect their April-June China results.

Nissan will announce its July-September results on Monday, followed by Honda on Wednesday and Toyota on Thursday.

Still, Japanese auto makers, like the rest of the auto sector, face uncertainties in their biggest markets.

In the U.S., some regulators have warned of risky auto-lending activities, raising concerns over how much longer the strong market can be sustained.

Investors are also trying to gauge whether the slowdown in China has hit bottom after the government cut taxes for small cars.

Last week, two of Japan's biggest auto-parts suppliers, Denso Corp. and Aisin Seiki Co., cut their full-year net-profit outlook, citing uncertainties in China and in Southeast Asia, a stronghold of Japanese auto makers that has been hit by declining vehicle sales.

An expected interest-rate increase by the Federal Reserve is casting a shadow over emerging countries such as Brazil and Russia, where auto demand has been plunging.

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(END) Dow Jones Newswires

November 02, 2015 02:47 ET (07:47 GMT)

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