Target $100 on Toyota Shares

Toyota Motor Corporation (TM) continues to expand its production capacity in a manner that increases efficiency and meets local demand while putting it on the way to becoming the world's financially strongest automaker. It has a strong presence in North America and has been successful in grabbing a market share from the leading U.S. automakers. Moreover, Toyota Motor Corporation also has a strong cash-flow position and a strong balance sheet.

Management provided guidance for the full-year fiscal 2008. The company expects consolidated vehicle sales to remain unchanged from the previous forecast of 8.93 million units. However, management lowered its forecast in North America by 20,000 units to 2.97 million units while keeping consolidated revenues and earnings forecast for the fiscal year unchanged. Consolidated net revenues of $238.61 billion, operating profit of $21.5 billion, and net income of $15.91 billion remained unchanged.

Currently, ADRs of Toyota Motor Corporation are trading at 9.8x our 2008 EPADR estimate of $10.63. Improved sales efforts, successful cost containment measures and Toyota's technical advancement are some of the factors that make us believe that the stock should trade at a higher P/E multiple. However, rising costs, pricing pressures and huge capital expenditures lead us to rate the stock a Hold with a six-month target price of $100. This is 9.4x our 2008 EPADR estimate. 

Keeping Texas Capital a Hold

Texas Capital Bancshares (TCBI) reported operating results of $0.24 per share for the fourth quarter 2007 versus $0.29 per share recorded in the prior-year period. Results for the quarter were in-line with our expectation, several pennies ahead of consensus.

Growth remains paramount, as average portfolio loans expanded 27.4% year-over-year in 4Q07. The results included a significant increase in the provisioning level, based on the January 14, 2008 announcement. The benefit from the lower level of non-interest expenses recorded in this quarter (lower salaries and benefits from an adjustment in incentive expense to reflect actual performance for the year) partially offset some of the increase in provisions.

We have lowered our 2008 EPS expectation to $1.31 per share and installed our early 2009 EPS expectation at $1.60 per share. We have adjusted our 2008 earnings expectation and installed our early 2009 earnings expectation based on 4Q07 results. TCBI currently trades at 12.8x the consensus forward estimate (versus 11.2x at the time of our last report) an 8.5% discount to the small-cap peer group median (versus a 13% discount at that time).