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Toyota shares jumped the most in more than seven months after the automaker announced a stock buyback and gave a profit guidance that assuaged concerns about a slowing US market and stronger yen weighing on earnings.
The world’s most valuable carmaker plans to buy back as much as ¥300bn of shares. The company’s ¥2.3trn operating profit forecast also exceeded average analyst estimate.
Chief executive officer Akio Toyoda is accelerating cost reductions, trying to shore up the company’s coffers to prepare for a shift toward electrification and autonomous driving.
Even as growth sputters in the US, where the eight-decade-old automaker sells a quarter of its vehicles, it’s managing to ward off competition with demand for the RAV4 sport utility vehicle and updated Camry sedan.
“The outlook for the year was a positive surprise,” said Koji Endo, an analyst at SBI Securities. “It’s much more aggressive than expected and seems like Toyota has shifted from its conservative forecasts.”
Toyota shares jumped 3.8% in Tokyo trading to ¥7 424, the highest level in three months. Wednesday’s gain brought the stock into positive territory for the year.
The company has also gradually been increasing sales in China, lessening its reliance on a US market where rising incentive spending is weighing on margins.
While China is on track to become the biggest market for both Nissan and Honda, Toyota sells only half as many vehicles there as in the US.
Toyota said it sees growth coming from Asia this year - and that means China. Sales at its Japanese, North American and European units are all expected to decline, the company projected.
Additions to the model line-up could provide a boon to Toyota later this year. The company plans to release an all-new edition of the RAV4, its biggest-selling SUV in the US, and introduce the compact crossover C-HR in China, its first entry in the nation’s hottest segment.
The yen could continue to be a hindrance. Exchange-rate changes will probably cut ¥230bn from operating profit this year, Toyota said.
After averaging a steady ¥112/$ last year, Japan’s currency has strengthened to ¥109 in 2018 as the threat of a trade war between the US and China spurred demand for the yen as a safe haven. Foreign-exchange analysts on average predict the yen to appreciate to ¥103/$ in 2019, and Toyota as well as Honda are forecasting an average of ¥105 for the current fiscal year.
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