Toyota rates a M-fbuyM-F after record annual profit

Taking Stock

Your Money

August 08, 2004|By ANDREW LECKEY

OF ALL the carmakers, IM-Fm most interested in Toyota Motor Corp. as a potential investment. How does it stack up against Honda Motor Co.?

M-y T.C., via the Internet

Toyota, JapanM-Fs largest carmaker, is enjoying a much smoother ride than third-largest Honda. Honda lost its secondplace position to Nissan Motor Co. Except for its popular Acura TL sedan and Honda Pilot sport utility vehicle, sales of its key models are slipping.

With 80 percent of Honda sales in the United States, the rising Japanese yen lowers the value of its U.S. sales and significantly hurts profit.

Although Honda profit was a record in its fiscal year that ended March 31, that 9 percent increase fell short of analystsM-F expectations.

Toyota benefits from having a much larger lineup of vehicles, ranging from subcompacts to large pickups, as well as V8 engines that Honda lacks. ToyotaM-Fs Prius gas-electric hybrid sedan and new Scion line targeting younger drivers are hot sellers. Global production is expected to total 7.39 million vehicles in 2005.

Toyota posted the highest annual profit in its history during its fiscal year that ended March 31, with earnings up 55 percent. It is positioned for success in the rapidly growing Asian market.

Stock of Toyota (ticker TM) is up 14 percent this year, after a gain of 31 percent last year. Stock of Honda (HMC) is up 3 percent after last yearM-Fs 25 percent increase.

Consensus stock recommendation from analysts on Toyota is a M-tbuy,M-v according to the Thomson First Call research firm in Boston. That consists of one M-tstrong buy,M-v one M-tbuyM-v and two M-tholds.M-v Honda ranks midway between a M-tbuyM-v and M-thold,M-v its rating consisting of two M-tbuysM-v and two M-tholds.M-v

Honda, which is increasing investment in U.S. production to reduce effects of currency valuations, will offer the new Odyssey mini-van this fall.

Honda will introduce a car in the United States in 2006 priced below its Civic sedan, which starts at $13,000. The company plans to double its motorcycle sales in China by 2007 by increasing local production.

The solid Toyota reputation for quality gives it outstanding brand strength, and the constant improvements it makes to vehicles puts it ahead of competitors. The biggest risk is that other manufacturers will continue their recent gains in vehicle quality.

Andrew Leckey is a Tribune Media Services columnist. Email him at yourmoney@tribune. com.

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