Shares of Toyota (NYSE:TM) are under pressure after the automaker reported that its July global production had fallen by 8.6% year-over-year (YOY). In that month, the company produced 706,547 vehicles, falling short of its target of 800,000 vehicles and down from 773,135 vehicles a year earlier. It was the fourth straight monthly miss in a row, and Toyota stock ended the day down 1%.
Meanwhile, production in the first four months of Toyota’s fiscal year is currently 10.3% below the company’s target. For the full year, guidance has been set to 9.7 million vehicles.
The automaker has dealt with a variety of issues this year, such as supply chain inefficiencies stemming from Chinese lockdowns, heavy rains in Japan and a production halt due to a recall investigation. However, the company plans on producing 700,000 vehicles for August, up from 530,000 vehicles YOY. For September, it expects to produce a monthly record high of 850,000 vehicles.
Toyota Stock Under Pressure Due to July Production Numbers
Analyst are feeling optimistic about Toyota as well. Tokai Tokyo Research Institute analyst Seiji Sugiura believes that Toyota’s situation is “starting to improve.” Still, the analyst is wary about chip supplies and the company’s full-year guidance. In the second half of the year, Sugiura expects the company to set monthly production guidance of between 800,000 and 850,000 vehicles.
Earlier this month, Toyota maintained its full-year operating profit of 2.4 trillion yen, or $18 billion. On the other hand, analysts were expecting operating profit of 3.3 trillion yen, representing a miss of almost 40%. For the April through June quarter, Toyota reported operating profit of 579 billion yen, again falling short of the 808 billion yen analyst estimate. The automaker warned, “We are not confident enough to raise guidance.”
Bloomberg Intelligence analyst Tatsuo Yoshida is still hopeful though, explaining the company usually issues conservative outlooks. Barring any surprises, Yoshida believes it is likely Toyota will raise its forecast. In the past six years, Toyota has surpassed its profit guidance five times.
The lower-than-expected guidance may be a sign the company foresees additional production issues. This may be due to Toyota making sure that its suppliers “remain operationally and financially sound” by absorbing the raw material cost increases.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
