Analyst Note| David Whiston, CFA, CPA, CFE |
Toyota’s second-quarter fiscal 2021 showed a sharp rebound from the first quarter, which had severe coronavirus-related headwinds. Still, a 17.6% decline in second-quarter consolidated unit volume, which was notably worse than Honda’s 9.1% decline in consolidated automotive unit volume, and less cost-saving tailwinds relative to Honda’s results reported the same day, did not enable Toyota to post meaningful year-over-year EPS growth like Honda’s 24.9%. Toyota’s diluted EPS fell by 10.9%, but management still materially increased its full-year fiscal 2021 guidance from three months ago. We are raising our fair value estimates to $138 and JPY 7,100 due to better fiscal 2021 results than previously modeled as the company recovers from the pandemic faster than expected, higher equity income over our five-year explicit forecast period, and the time value of money. Our USD fair value also benefited from the favorable translation impact of our yen fair value against a stronger yen to the dollar than at our last valuation update.