Analyst Note
| David Whiston |We are not changing our Honda fair value estimate following the firm reporting fiscal 2023 full-year and fourth-quarter results. We will revisit all modeling assumptions when we roll our model forward for the 20-F filing, which we expect in late June. Fourth-quarter EPS declined by 8.4% year over year to JPY 66.89 and missed the Refinitiv consensus of JPY 89.33. Operating income fell 47.2% despite revenue up 13.1%, primarily from JPY 66.9 billion of various expense increases, most notably JPY 51.8 billion in warranties. Research costs were up JPY 46.9 billion, nearly entirely offset by a JPY 42.1 billion foreign-exchange benefit that contained JPY 34 billion alone from the yen weakening against the dollar to an average fiscal fourth-quarter rate of JPY 132, versus JPY 116 a year ago. Honda’s full year currency benefit was JPY 295.9 billion, with JPY 233 billion from the yen to dollar. Fiscal fourth-quarter earnings also suffered from a JPY 76.9 billion equity-method income headwind due to impairments and weak Chinese automotive demand. Honda’s fiscal fourth quarter Chinese retail automotive unit sales fell year-over-year by nearly 40% to 220,000.