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Honda (HMC) to Report Q1 Earnings: What's in Store?

Honda Motor Co., Ltd. HMC is expected to report first-quarter fiscal 2018 (ended Jun 30, 2017) results on Aug 1. Last quarter, the company delivered a positive earnings surprise of 123.81%.

In fact, Honda delivered a positive earnings surprise in each of the trailing four quarters, with an average beat of 70.97%.

Let’s see how things are shaping up for this announcement.

Factors Influencing this Quarter

Honda has been focusing on infrastructural development, new product and car launches in Asia, North and South America. Moreover, it has also has plans of launching fuel cell vehicles in the U.S. and European markets. These efforts are likely to popularize the company and attract more customers, which in turn will boost its revenues. For fiscal 2018, Honda expects revenues to improve 1.4% to ¥14.2 trillion ($135.24 billion).
However, overall, Honda has provided a weak guidance for fiscal 2018. Operating income is projected to decline 16.1% to ¥705 billion ($6.71 billion). Net income is likely to decrease 14% to ¥530 billion ($5.05 billion) or ¥294.07 ($2.83) per share, decreasing 48% year over year.

Honda has been recalling vehicles frequently over the last few years. Frequent product recalls not only reduce consumers’ confidence in a brand, but also add to the expenses.

Earnings Whispers

Our proven model does not conclusively show that Honda is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below.

Zacks ESP: The Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. Honda’s Earnings ESP is 0.00% because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 83 cents.

You can uncover the best stocks to buy or sell before they’re reported with our">Earnings ESP Filter.

Zacks Rank: Honda carries a Zacks Rank #3. We caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks to Consider

Here are a few companies you may want to consider, as our model shows that these have the right combination of elements to come up with an earnings beat this quarter:

Cummins Inc. CMI has an Earnings ESP of +3.1% and a Zacks Rank #2. The company is expected to report second-quarter 2017 results on Aug 1. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Westlake Chemical Corporation WLK has an Earnings ESP of +5.04% and a Zacks Rank #2. The company’s second-quarter 2017 results are expected to release on Aug 3.

Horizon Global Corporation HZN has an Earnings ESP of +2.99% and a Zacks Rank #3. The company’s second-quarter 2017 results are expected to release on Aug 1.

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