Toyota's Upbeat Profit Forecast, Stock Buyback Lift Shares

(Bloomberg) -- Toyota Motor Corp. shares jumped the most in more than seven months after the automaker announced a stock buyback and gave a profit guidance that assuaged concerns about a slowing U.S. market and stronger yen weighing on earnings.

The world’s most valuable carmaker plans to buy back as much as 300 billion yen ($2.7 billion) of shares. The company’s 2.3-trillion-yen operating profit forecast also exceeded average analyst estimate.

Chief Executive Officer Akio Toyoda is accelerating cost reductions, trying to shore up the company’s coffers to prepare for a shift toward electrification and autonomous driving. Even as growth sputters in the U.S., where the eight-decade-old automaker sells a quarter of its vehicles, it’s managing to ward off competition with demand for the RAV4 sport utility vehicle and updated Camry sedan.

“The outlook for the year was a positive surprise,” said Koji Endo, an analyst at SBI Securities Co. “It’s much more aggressive than expected and seems like Toyota has shifted from its conservative forecasts.”

Toyota shares jumped 3.8 percent in Tokyo trading to 7,424 yen, the highest level in three months. Wednesday’s gain brought the stock into positive territory for the year.

Toyota's Upbeat Profit Forecast, Stock Buyback Lift Shares

The company has also gradually been increasing sales in China, lessening its reliance on a U.S. market where rising incentive spending is weighing on margins. While China is on track to become the biggest market for both Nissan Motor Co. and Honda Motor Co., Toyota sells only half as many vehicles there as in the U.S.

Toyota said it sees growth coming from Asia this year -- and that means China. Sales at its Japanese, North American and European units are all expected to decline, the company projected.

Additions to the model lineup could provide a boon to Toyota later this year. The company plans to release an all-new edition of the RAV4, its biggest-selling SUV in the U.S., and introduce the compact crossover C-HR in China, its first entry in the nation’s hottest segment.

Toyota's Upbeat Profit Forecast, Stock Buyback Lift Shares

The yen could continue to be a hindrance. Exchange-rate changes will probably cut 230 billion yen from operating profit this year, Toyota said.

After averaging a fairly steady 112 per dollar last year, Japan’s currency has strengthened to 109 in 2018 as the threat of a trade war between the U.S. and China spurred demand for the yen as a safe haven. Foreign-exchange analysts on average predict the yen to appreciate to 103 per dollar in 2019, and Toyota as well as Honda are forecasting an average of 105 yen for the current fiscal year.

©2018 Bloomberg L.P.