Honda raised its annual profit outlook above market expectations

Article by Christian A., on February 1, 2011

Honda Motor Co. reported a 29 percent fall in October-December operating profit to JPY125.65 billion ($1.53 billion), from JPY177 billion a year earlier and beating the average JPY110 billion estimated by seven analysts surveyed by Reuters.

The automaker raised its annual profit outlook above market expectations as a recovery in the key U.S. market helped counter the strong yen and sliding Japanese sales, which weighed on third-quarter earnings.

Koichi Ogawa, chief portfolio manager at Daiwa SB Investments said that Honda’s strong earnings were backed by strong growth in North America and Asia and “robust” motorcycle demand in emerging markets also helped Honda's earnings.

Honda, which fell behind Nissan Motor Co. to become Japan's third-biggest automaker in 2010, raised its operating profit forecast for the year to March 31 to JPY620 billion from JPY500 billion. A survey of 20 analysts by Thomson Reuters I/B/E/S forecasts profit of JPY594 billion.

The carmaker lifted its net profit forecast to JPY530 billion from JPY500 billion and nine-month profits easily exceeded Honda's previous full-year profit forecast.

Japan's major automakers are forecasted to report a sharp decline in October-December profits as the end of subsidies for eco-friendly cars hits domestic sales and prices for raw materials like steel rise.

However, Japanese car makers have also taken steps to improve manufacturing efficiency and reduce fixed costs to keep profit margins relatively healthy, boding well for future earnings as the U.S. market recovers. [via autonews - sub. required]

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