Honda Gains Most Since March as Profit, U.S. Sales Top Estimates

  • XR-V and Vezel SUVs pace demand in China; CR-V climbs in U.S.
  • Results show Honda ‘restoring trust,’ Jefferies analyst says

U.S. July Auto Sales Boosted by Extra Weekend

Honda Motor Co. climbed the most intraday in five months as demand for its Vezel and CR-V sport utility vehicles paced quarterly profit and monthly U.S. sales that beat estimates.

Net income of 174.7 billion yen ($1.7 billion) in the three months through June was driven by better-than-expected demand for XR-V and Vezel SUVs in China, Honda said Tuesday in Tokyo. The CR-V was the top-selling SUV in the U.S. for the month of July, lifting Honda to a 4.4 percent overall sales gain that also exceeded analysts’ estimates.

Honda surged as much as 6.4 percent, their biggest intraday jump since March. The shares rose 3.7 percent as of 10:46 a.m. Wednesday in Tokyo. The sales and earnings results suggest President Takahiro Hachigo is progressing with efforts to turn around the third-largest Japanese automaker after the outsize impact of Takata Corp.’s air-bag crisis led the company underperform versus peers Toyota Motor Corp. and Nissan Motor Co.

“We expected upbeat earnings beating the consensus in our advance forecast, but the actual results significantly exceeded expectations,” Takaki Nakanishi, an analyst for Jefferies Group LLC, wrote in a report. “We realize that disclosure of very cautious guidance dealt a setback to investor trust in Honda’s ability to return to the mean. However, we think the latest results should serve as a catalyst for restoring trust.”

Net income topped the 134.6 billion yen average of analysts’ estimates compiled by Bloomberg. The monthly U.S. sales gain beat analysts’ average projection for a 0.4 percent drop in deliveries and outpaced the 0.7 percent industrywide increase.

Honda lowered its U.S. spending on incentives and marketing promotions by about 11 percent in the first six months, according to researcher Autodata Corp. In China, a cut in the purchase tax of smaller-engine models spurred sales of cars like the City small sedan and XR-V crossover to outpace industrywide expansion.

“Sales have recently been growing steadily,” Eiji Hakomori, an analyst at Daiwa Securities Group Inc., wrote in a report last month. “In particular, sales in China appear to be outpacing the firm’s expectations” and its U.S. sales have “gained vigor for the first time in a long time.”

  • Honda’s 3.47 trillion yen sales in the first quarter was in line with analysts’ 3.46 trillion yen average estimate
  • Operating profit was 266.8 billion yen, compared with analysts’ 183.6 billion yen average estimate
  • Honda maintained its full-year forecast for net income of 390 billion yen
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