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2021 Was Good to Toyota. 2022 Won’t Be.

By some measures, Toyota Motor Corporation (NYSE: TM) is the biggest car company in the world — but it may not be so for long. 
On Wednesday, May 11, Toyota reported its final financial results for its fiscal year 2022, which ended in March. The company sold 8.2 million Toyotas (9.5 million including the Lexus brand, and 10.4 million including all of its brands), up 7.6% from fiscal 2021. Sales climbed 15.3% to 31.4 trillion yen ($241.8 billion at current exchange rates). And with Toyota earning a very respectable 9.5% operating profit margin on those sales, operating profits climbed 36% to 3.99 trillion yen ($30.7 billion). After taxes, that worked out to a 9.1% net profit margin, and $2.85 trillion yen on the bottom line — $22 billion.
That’s the good news, as the saying goes. Now here’s the bad.
The spread of Covid-19 in China and elsewhere continues to strain automotive supply chains, resulting in “soaring material prices,” says Toyota. This is exacerbating well-publicized deficits in supplies of semiconductor chips for automobiles from the global semiconductor shortage. And this means that Toyota is anticipating much slower growth in fiscal 2023 than it enjoyed in fiscal 2022.
Image source: Getty Images.

Toyota’s 2023 guidance
Addressing its plans for the future, Toyota is anticipating that sales of Toyota vehicles in fiscal 2023 won’t exceed 8.85 million. That works out to about 7.5% unit growth. Toyota and Lexus total unit sales will only grow about 4.2%, however, to 9.9 million (and at one point in its presentation, Toyota actually estimated these sales will be closer to 9.7 million), and total sales of all brands will be only 10.7 million units — less than 3% growth.
What does that mean in yen and cents? Toyota forecasts sales of about 33 trillion yen this coming year — about 5% sales growth, or just one-third the rate of sales growth last year. And that’s not the worst of it. Citing continuing “unprecedented increases in materials and logistics costs,” Toyota was forced to cut its forecast for operating profit to just 2.4 trillion yen, which works out to about $18.5 billion at current exchange rates, a staggering 40% reduction in profit for the year.
To put that in context, according to data from S&P Global Market Intelligence, Wall Street analysts on average are still expecting Toyota to earn operating profits of about $24.3 billion this coming year — which means that Toyota just guided 24% below estimates.
Toyota stock fell 5.6% in Wednesday trading after the news broke. As more investors crunch the numbers and figure out how big of a miss Toyota just predicted, you can expect the stock to potentially fall further.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. –

By some measures, Toyota Motor Corporation (NYSE: TM) is the biggest car company in the world — but it may not be so for long. 

On Wednesday, May 11, Toyota reported its final financial results for its fiscal year 2022, which ended in March. The company sold 8.2 million Toyotas (9.5 million including the Lexus brand, and 10.4 million including all of its brands), up 7.6% from fiscal 2021. Sales climbed 15.3% to 31.4 trillion yen ($241.8 billion at current exchange rates). And with Toyota earning a very respectable 9.5% operating profit margin on those sales, operating profits climbed 36% to 3.99 trillion yen ($30.7 billion). After taxes, that worked out to a 9.1% net profit margin, and $2.85 trillion yen on the bottom line — $22 billion.

That’s the good news, as the saying goes. Now here’s the bad.

The spread of Covid-19 in China and elsewhere continues to strain automotive supply chains, resulting in “soaring material prices,” says Toyota. This is exacerbating well-publicized deficits in supplies of semiconductor chips for automobiles from the global semiconductor shortage. And this means that Toyota is anticipating much slower growth in fiscal 2023 than it enjoyed in fiscal 2022.

Image source: Getty Images.

Toyota’s 2023 guidance

Addressing its plans for the future, Toyota is anticipating that sales of Toyota vehicles in fiscal 2023 won’t exceed 8.85 million. That works out to about 7.5% unit growth. Toyota and Lexus total unit sales will only grow about 4.2%, however, to 9.9 million (and at one point in its presentation, Toyota actually estimated these sales will be closer to 9.7 million), and total sales of all brands will be only 10.7 million units — less than 3% growth.

What does that mean in yen and cents? Toyota forecasts sales of about 33 trillion yen this coming year — about 5% sales growth, or just one-third the rate of sales growth last year. And that’s not the worst of it. Citing continuing “unprecedented increases in materials and logistics costs,” Toyota was forced to cut its forecast for operating profit to just 2.4 trillion yen, which works out to about $18.5 billion at current exchange rates, a staggering 40% reduction in profit for the year.

To put that in context, according to data from S&P Global Market Intelligence, Wall Street analysts on average are still expecting Toyota to earn operating profits of about $24.3 billion this coming year — which means that Toyota just guided 24% below estimates.

Toyota stock fell 5.6% in Wednesday trading after the news broke. As more investors crunch the numbers and figure out how big of a miss Toyota just predicted, you can expect the stock to potentially fall further.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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