Stock Analysis

Honda Motor Co., Ltd. Just Recorded A 8.9% EPS Beat: Here's What Analysts Are Forecasting Next

TSE:7267
Source: Shutterstock

Investors in Honda Motor Co., Ltd. (TSE:7267) had a good week, as its shares rose 2.0% to close at JP¥1,770 following the release of its yearly results. Honda Motor reported JP¥20t in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of JP¥226 beat expectations, being 8.9% higher than what the analysts expected. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

See our latest analysis for Honda Motor

earnings-and-revenue-growth
TSE:7267 Earnings and Revenue Growth May 31st 2024

Taking into account the latest results, the current consensus from Honda Motor's 17 analysts is for revenues of JP¥21t in 2025. This would reflect an okay 3.0% increase on its revenue over the past 12 months. Statutory per share are forecast to be JP¥226, approximately in line with the last 12 months. In the lead-up to this report, the analysts had been modelling revenues of JP¥21t and earnings per share (EPS) of JP¥227 in 2025. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.

The analysts reconfirmed their price target of JP¥1,975, showing that the business is executing well and in line with expectations. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Honda Motor at JP¥2,400 per share, while the most bearish prices it at JP¥1,300. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Honda Motor's revenue growth is expected to slow, with the forecast 3.0% annualised growth rate until the end of 2025 being well below the historical 5.4% p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 3.1% annually. Factoring in the forecast slowdown in growth, it looks like Honda Motor is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on Honda Motor. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Honda Motor analysts - going out to 2027, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Honda Motor , and understanding this should be part of your investment process.

Valuation is complex, but we're helping make it simple.

Find out whether Honda Motor is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.