Toyota Feels Weak US Market
In 2009 first quarter, Toyota Motor Corp. (TM) reported diluted earnings per ADR of $2.14 compared to $2.94 in the corresponding quarter of the previous year. Net revenues decreased 4.7% year over year to $5.92 billion. The company attributes the decrease in revenues to soaring raw material prices and exchange rates fluctuations. Consolidated vehicle sales for the quarter amounted to 2.19 million units, an increase of 24,000 units compared with the same period of fiscal 2008.
The company continues to expand its production capacity in a manner that increases efficiency and meets local demand and simultaneously powering it to emerge as the world?s financially strongest automaker. A strong presence in North America has been further consolidated by gaining market share from the leading U.S. automakers. Moreover, the company also has a strong cash flow and a strong balance sheet.
However, Toyota is unable to offset sales losses in America even as it continues an aggressive expansion in China, the Middle East and other emerging markets. Sluggish US economy, rising costs, pricing pressures and huge capital expenditures prompt us to rate the stock a Hold with a six-month target price of $78.00.
On August 10, Toyota Motor announced raising prices on hybrid and commercial vehicles by 1 to 3% in 2009 for models such as the Prius hybrid car and the Dyna truck. The company will not raise prices for models including, the Corolla subcompact and the Crown luxury sedan. Toyota had determined that across-the-board price hikes would further dampen sales at a time when domestic demand is already weak.
Best Buy Selling iPhones
Best Buy (BBY) looks to get the edge on its competition by retailing the new iPhone that debuted a month ago at Apple (AAPL) and AT&T (T)? stores exclusively.? The product release sold one million iPhones in its opening weekend.
Like most big-box retailers, tighter times appear ahead now that stimulus checks have worked their way through the system.? This move for Best Buy should increase sales for the company in the near term.
Analysts ahead of the August quarter earnings report have been moderate and mixed in their EPS estimates over the past month.? The Zacks consensus estimate for the quarter is 57 cents a share, and the fiscal 2009 (ending next February) estimate was $3.31 before the announcement.? The Zacks Rank #3 (Hold) on BBY shares indicates no upward or downward pressure on the shares.
LDK Solar on the Horizon
LDK Solar Co.?s (LDK) revenue and earnings for the second quarter continued to show strong growth, which again exceeded market expectations. We think LDK will continue to grow quickly in the next few quarters due to its aggressive capacity expansion and strong growth of solar power industry worldwide.
For the second quarter ended June 30, net sales stood at $441.7 million, up 89.2% from $233.4 million for the first quarter of 2008, and up 345.9% year-over-year from $99.1 million for the second quarter of 2007.
LDK is well positioned to leverage the growth prospects of solar power industry. According to Photon International, global crystalline solar cell or module production will increase from 1.5 gigawatts in 2005 to 12 gigawatts in 2010. Additionally, the company uses a wide range of silicon feedstock material in its manufacturing process, which lowers its cost basis compared with companies that use a higher percentage of high-cost virgin polysilicon.
LDK has a well-diversified custom base, which enables the company to encounter the risk of losing business from a single area. It has solid supply agreements for raw polysilicon and equipment, which cover more than 70% of the company?s revenue estimates in 2008.
