TM Stock Looks Like a Long-Term Winner

Toyota Motor Corp (NYSE:TM) has become one of the world’s most beloved automakers. And it’s no surprise, since TM has consistently topped quality and customer satisfaction surveys, earning its spot as the world’s biggest automaker.

toyotaStill the company isn’t resting on its laurels. Fierce competition has forced TM to look at new ways to grow its business – and that’s exactly what the company’s doing.

TM stock is a long-term winner. Let’s look at the reasons why.

TM Is Outpacing Other Carmakers

As the first automaker to mass-market a hybrid vehicle, Toyota has long been at the forefront of cutting-edge technologies. And people have responded, flocking to TM’s ever-growing line of hybrids and making Toyota’s hybrids the best-selling in the world.

Although hybrid sales suffered last year due to low oil prices, Toyota still led in overall hybrid sales, with the Prius leading the way. And as far as gas prices go, it’s only a matter of time before oil rebounds and people look to offset higher fuel costs with fuel-efficient hybrid vehicles.

But Toyota is looking beyond the hybrid to the next step in the automobile’s evolution. Later this year, TM will introduce the Mirai, a hydrogen fuel-cell vehicle expected to give the electric car — particularly Tesla Motor Inc’s (NASDAQ:TSLA) Model S — a run for its money.

TM’s Mexico Facility Will Cut Costs

TM is concerned not only with growing the company through innovative products but by holding the line on costs. To that end, later this year Toyota’s board is expected to approve the building of a production facility in Mexico. The factory will produce the Toyota Corolla and is scheduled to begin operation in 2019.

The move continues a trend of car manufacturers moving operations to Mexico to take advantage of lower wages, the lower cost of doing business and Mexico’s NAFTA membership. The move will make TM even more competitive.

TM also has an agreement with Mazda Motor Corp (OTCMKTS:MZDAY) that will allow it to manufacture some vehicles in Mazda’s Guanajuato facility. Mexico surpassed Japan as the No. 2 auto exporter to the U.S. last year and could take the top spot from Canada this year.

TM Profits Have Gone Through the Roof

Due in part to a weak yen versus the dollar, Toyota is expected to earn 2.1 trillion yen ($18.1 billion) by March 31, the end of its fiscal year. That’s an increase over TM’s guidance of 2 trillion yen.

TM’s fiscal 2015 third-quarter earnings were also something for Toyota to cheer about. The company had a net income of 600 billion yen ($5.1 billion), up from 525 billion yen for the same period last year and beating analysts’ estimates of 549.2 billion yen.

I mentioned above that hybrid sales were down due to lower fuel costs, but what’s interesting is how TM is making up for the loss. It seems cheap gas is enabling consumers to buy more SUVs and pickups, which are more profitable than smaller cars.

Bottom Line

Although the latest quarter revealed a slight sales decrease in certain markets, Toyota is finding ways to cut costs while manufacturing ahead-of-the-game vehicles. This bodes well for the company, giving it an edge over its rivals in the years ahead.

As of this writing, Will Emerson did not hold a position in any of the aforementioned securities.

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