Thursday, November 21, 2013
Honda Motor Revs up Returns: HMC
However, many consumers put off purchasing a new vehicle during the recent worldwide economic slowdown. That situation is about to change.
The age of the average vehicle on US roads recently hit an all-time record: 11.4 years.
There is enormous pent-up demand for new cars and trucks. And we are beginning to see that demand show up in the Honda sales numbers.
In the most recent quarter, sales jumped 16.3%. And they are likely to climb sharply higher in the months ahead. Honda will earn approximately $2.50 a share in 2013. But I estimate net income will climb 40% in the year ahead.
One reason is new model introductions. Another is the weaker yen. A declining currency makes Japanese cars more competitively priced in foreign markets.
And most of Honda's sales, of course, are exports. We got a sign of what is ahead when Toyota reported unexpectedly strong sales and earnings. Plus, Honda yields 5%. And that dividend should rise with earnings in the weeks ahead.
In short, rising demand, a falling yen, and new model introductions should drive this Japanese blue chip sharply higher.
So, pick up Honda shares at market today. And place a protective stop at $32. If you prefer to play this one more aggressively, try the April $45 calls, which last traded at $0.60.
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