by Jim Woods | August 17, 2012 7:30 am
Whenever a company makes big changes to its bread-and-butter product, it’s a huge risk. Do it wrong, and you alienate your core buyer, lose sales and even worse — cause the value of your share price to go down. Do it right, and you renew the bond between core buyers, attract a brand-new customer base and even better — cause the value of your share price to surge.
Fortunately for Toyota Motor (NYSE:TM), the latter scenario is playing out with its newly redesigned Camry.
According to industry research group Autodata, U.S. Camry sales in July came in at 29,913, up 10.7% from a year ago, outpacing second-place Honda Motor (NYSE:HMC) and its stalwart Accord for top honors as best-selling car in America.
Speaking recently at the JPMorgan Auto Conference in New York, Toyota’s Bob Carter, senior vice president of automotive operations in the U.S, said Camry sales are up 40% this year to 244,000. That easily bests the Camry’s two biggest competitors, the Accord and the Nissan Motor‘s (PINK:NSANY) Altima.
For Toyota, the spark in Camry sales is more good news for a company that this time last year was trying to recover from a terrible hit to its supply lines from the combined tsunami/earthquake/nuclear meltdown in Japan, as well as floods in Thailand that knocked out many auto electronics’ suppliers.
Proof that Toyota is back on track was seen in the company’s latest earnings report, which showed net income for fiscal Q1 vaulted to 290.3 billion yen, or $3.7 billion, a number that easily bested analysts’ expectations. By comparison, rival General Motors (NYSE:GM) reported net income of just $1.85 billion for its most recent quarter.
Toyota also reported that auto sales in the quarter surged 60% to 5.5 trillion yen, or $70.5 billion. In terms of the total number of vehicles, that metric nearly doubled over the prior year quarter to 2.3 million.
In yet another positive for Toyota going forward, the company revised its sales goals for the year. It now expects to see record sales of 9.76 million vehicles, which represents a 23% jump over last year. If it succeeds in reaching this lofty target, Toyota will likely reclaim the mantle of global sales leader for the year from GM and German behemoth Volkswagen (PINK:VLKPY).
One reason Toyota has managed to juice its sales RPM while rivals struggle: It gets only minimal revenue from Europe. By contrast, Ford (NYSE:F), GM and Volkswagen are much more reliant on Europe for overall revenue and sales. Given the region’s recessionary woes, the less exposure a company has there the better.
In terms of investor reaction to the latest from Toyota, we’ve also seen Wall Street jump on board. TM shares are up 7.6% over the past month, and 21% year-to-date. That 2012 performance crushes Ford, which has seen its shares plunge 13.6% so far in 2012. It also runs laps around Honda’s mere 4% gain so far this year, and GM’s essentially flat year-to-date performance.
Surging Camry sales, minimal exposure to ailing Europe and investor momentum make TM shares the leading major auto stock to buy here. So, if you’re looking to take a ride in the sector, be sure to kick TM’s tires.
As of this writing, Jim Woods did not hold a position in any securities mentioned here.
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