For Immediate Release
Chicago, IL – August 30, 2010 – Zacks.com Analyst Blog features:
Toyota Motor Corp. (TM), Ford (F), Toyota (TM), Boeing Company (BA ) and Dollar Financial Corporation (DLLR).
Here are highlights from Friday’s Analyst Blog:
Toyota Recall Parade Continues
Toyota Motor Corp. (TM) added 1.33 million vehicles to its series of recalls spanning a period of nearly one year. It includes Corolla sedans and Matrix hatchbacks manufactured between 2005 and 2008 and sold in the U.S. and Canada.
In December, the National Highway Traffic Safety Administration began an investigation into Corolla and Matrix vehicles from the 2006 model year due to a possible engine defect that could cause them to stall. Last week, the investigation also included the same vehicles of 2005 and 2007 model years.
Toyota has attributed the problem to improper manufacturing of the vehicles’ engine control modules by the Delphi Corporation. The defective engine control modules allowed cracks to develop on the circuit board, causing the engines to stall or fail to start.
As of now, three accidents and one minor injury involving the recalled vehicles have been reported. However, Toyota is unsure about their direct relation with the engine defects.
The automaker has decided to replace the engine control modules on the recalled vehicles free of cost. The companies will begin mailing notifications to owners of the affected vehicles from mid-September.
The past string of recalls has already tarnished Toyota’s reputation, resulting in declining sales, lower vehicle resale value and a fallen stock price. Since October last year, the automaker has recalled about 11 million vehicles globally related to problems such as faulty accelerator gas pedals, slipping floor mats and defective braking systems.
The automaker’s last global recall was in late July involving 480,000 Avalon sedans and Land Cruiser sport-utility vehicles. The recall was related to defective steering parts in the vehicles.
GDP Revised Down on Inventory, Trade
The biggest part of the economy by far is Consumption, accounting for 70.4% of total GDP in the 2Q. In the 2Q Personal Consumption Expenditures (PCE) added 1.38 (1.15) points of growth down from 1.33 points in the 1Q but up from the 0.69 point addition in the 4Q.
People spend on both goods and services, and goods are further broken down into durable goods, such as cars and furniture, and non-durable goods like food and clothing (although the government clearly has not looked in my closet if they consider clothing to be non-durable, I think I still have some stuff that dates from the Reagan Administration).
In total, goods added 0.82 (0.79) points to growth in the 2Q down from 1.29 points in the 1Q but up from 0.42 points in the 4Q. Of that, durable goods added 0.49 (0.53) points versus 0.62 points in the 1Q but up from a 0.07 point subtraction from growth in the 4Q. Spending on durable goods was 7.36% of the entire economy in the 2Q.
By the very nature of being durable, spending on durable goods tends to be easy to postpone when times get tight. Instead of going out and buying a new car from Ford (F) or Toyota (TM)when people are worried that they might get laid off in the near future, they simply drive the old clunker a little longer. That demand then gets pent up (you get tired of driving that old thing or the repair bills start to mount) and when good times return, the spending on durable goods tends to jump. Thus, durable goods tend to “punch above their weight” when it comes to determining if the economy is in a recession or is booming.
Spending on non-durable goods is a much bigger part of the economy, at 15.77%. However, non-durable goods spending tends to be much more stable than spending on durable goods. In the 2Q, non-durable goods consumption added 0.33 (0.25) points to growth versus 0.67 points in the 1Q and 0.49 points in the 4Q.
Yet Another Delay for Boeing 787
Aerospace giant Boeing Company (BA ) announced that the consumers have to wait a little longer for the 787 passenger jetliner, as the first delivery is now expected mid-way through first-quarter 2011.
Boeing had earlier expected to deliver the first 787 to Japan's All Nippon Airways later this year. In July, the company rescheduled the delivery date and said the first 787 will be delivered within the first few weeks of 2011, citing supplier workmanship issues related to the horizontal stabilizer and instrumentation delays.
Boeing once again postponed the delivery date this month, owing to a holdup in availability of engines needed for the final phases of flight test this fall. Boeing is working closely with Rolls-Royce, the engine maker, to expedite engine availability. The company expects flight testing across the test fleet to be conducted as planned.
As it is, the 787 program is currently running two years behind schedule with the current delays adding to the waiting period of the consumers. The previous delays in launching the 787 jetliner were due to faulty parts from suppliers. Boeing assembles the different parts of the airplanes and depends on its suppliers from around the world to build a large portion of the aircraft.
Boeing’s 787 is the first passenger jetliner of which the major portion will be manufactured from lightweight and environmentally friendly composite material -- a break from traditional materials like aluminum and titanium that were generally used for manufacturing. The new airplane of the company will also be fuel efficient, consuming 20% less fuel than those of its peers.
Currently, Boeing has 847 orders for the 787. The orders for the much-delayed jetliner are in the negative for 2010 as the company has received 32 cancellations for its 787 since the beginning of 2010 and just 28 new orders. The basic model of 787 costs around $161 million and can be configured in two versions, a 787-8 carrying 210-250 passengers and a 787-9 carrying almost 300 people.
Dollar Financial Beats, Ups Outlook
Dollar Financial Corporation (DLLR) reported its fourth-quarter earnings (excluding one-time charges) of 42 cents per share, ahead of both the Zacks Consensus Estimate and the year-ago quarter’s estimate of 39 cents. Dollar Financial also reported its fiscal-year earnings (excluding one-time charges) of $2.01, which exceeded the Zacks Consensus Estimate of $1.99 and $1.90 from a year ago.
The operating results exclude non-recurring and non-cash charges, and are adjusted for pro forma effective income tax rates. Including these charges, GAAP loss was 21 cents per share in the fourth quarter while the loss was 20 cents in the fiscal year of 2010. This compares to $1.39 per share in the fourth quarter of 2009 and 28 cents in the fiscal year 2009.
Results for the quarter benefited primarily from increased revenues as a result of improvements in all revenue sources. However, higher operating expenses were the downside. Dollar Financial’s global business units continued to deliver strong earnings growth and cash flows during the reported quarter.
In addition, Dollar Financial remains on track on its expansion and diversification strategy. Along with the earnings, Dollar Financial has announced an acquisition agreement with Folkia Group AS, a leading Internet lending business based in Stockholm, Sweden.
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