Analyst Note| David Whiston, CFA, CPA, CFE |
Toyota’s fiscal 2021 third-quarter results showed a strong recovery underway after the pandemic. We are raising our fair value estimates to $146 and JPY 7,600 on the time value of money, higher profit forecasts for fiscal 2021 and fiscal 2022, and a slightly weaker yen on average against the dollar than previously modeled across our five-year forecast period. Consolidated quarterly revenue increased year over year by 7.1% to JPY 8.15 trillion while operating profit rose by 54.4% to JPY 987.9 billion. Operating margin increased by 370 basis points to 12.1%. Variables such as volume and mix drove most of the improvement and Americans love of light truck models is likely contributing to that delta. The yen did strengthen against the dollar year over year (JPY 105 versus JPY 109) but the JPY 55 billion operating profit headwind from exchange was easily surpassed by JPY 405 billion of marketing efforts (volume mix, and other unspecified factors) and cost reductions.