The Zacks Analyst Blog Highlights: Toyota Motor, General Motors, Volkswagen, Honda Motor and Gilead Sciences

Feb 21, 2013, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Feb. 21, 2013 /PRNewswire/ -- announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Toyota Motor Corp. (NYSE: TM), General Motors Company (NYSE: GM), Volkswagen AG (OTC:VLKAY), Honda Motor Co. (NYSE: HMC) and Gilead Sciences (Nasdaq:GILD).


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Here are highlights from Wednesday's Analyst Blog:

Toyota to Pay $29 Million in Lawsuit

Toyota Motor Corp. (NYSE: TM) agreed to pay $29 million to 29 states and American Samoa as part of a settlement related to a 2010 lawsuit accusing the automaker of late notification to customers regarding unintended acceleration in its vehicles. The participating states in the settlement include AL, AZ, AR, CO, CT, FL, IL, IA, KS, LA, MD, MI, MN, MS, NE, NV, NJ, NM, NC, OH, OR, PA, RI, SC, TN, TX, VA, WA and WI.

During the investigation of the lawsuit, state attorneys ascertained that poor communication between Toyota's headquarters in Japan and its U.S. offices had contributed to the late notification of the defect. In response to this, the automaker plans to improve communications between the offices and bestow more decision-making power to its U.S. executives.

Further, Toyota intends to post online owners manuals and expand its rapid response teams which will assist customers regarding any safety issues in the vehicles. It has also decided to reimburse customers for expenses related to the recalls, such as rental cars or taxi rides while their cars were being recalled.

U.S. Government Fine and Other Lawsuits

In Dec last year, the Transportation Department of U.S. had slapped a fine of $17.35 million on Toyota due to late response to safety regulators regarding a defect in its vehicles as well as late recall of those vehicles.

According to the department, it was the maximum allowable fine under the law for not initiating a recall in a timely manner. The fine was added to $48.4 million imposed by the U.S. government on the company in 2010 due to late recall of millions of defective vehicles.

In the same month, Toyota had also agreed to pay $1.1 billion to settle a class-action lawsuit related to complaints of unintended acceleration in its vehicles. According to a plaintiff lawyer, the settlement is one of the largest in a lawsuit in the history of automotive industry.

The lawsuit had blamed Toyota's defective electronic throttle-control system rather than floor mats and sticky accelerator pedals for unintended acceleration, resulting in a crash. The settlement would pacify 16 million owners of Toyota, Lexus and Scion of model years 1998 to 2010. They would be eligible for payments and safety updates on their vehicles.

According to a company filing in Jun 2012, Toyota faces more than 300 wrongful death or injury lawsuits. Last month, the company negotiated an undisclosed settlement with the families of two people who were killed in 2010 when their Toyota Camry crashed in Utah.

Past Recalls

Since Nov 2009, the automaker has recalled about 20 million vehicles globally, surpassing all other automakers. A few months back, Toyota had announced a major worldwide recall of 7.43 million vehicles that included more than a dozen models manufactured between 2005 and 2010. The recall was related to faulty power window switches in the vehicles that can cause fire because they did not have grease applied properly during production.

Sales Crown Regained

Despite these, Toyota recaptured the sales crown from General Motors Company (NYSE: GM) by selling 9.75 million vehicles globally in 2012, which exceeded GM's sales of 9.29 million vehicles. Germany's Volkswagen AG (OTC:VLKAY) came third with sales of 9.07 million vehicles for the year. Toyota's victory can be attributed to its impressive product lineups and marketing initiatives.

Surprisingly, sales in the company's domestic market surged 35% despite its sluggish economy. Sales of the company's domestic rival Honda Motor Co. (NYSE: HMC) grew 19% to 3.82 million vehicles in the year.

The automaker lost its No.1 position to GM in 2011 after gaining the title from GM in 2008. The loss of crown was driven by declining reputation due to a series of safety recalls as well as negative impact from natural disasters in Japan and Thailand in 2011. However, Toyota had vowed to regain the top position by increasing its dependence on the non-U.S. markets, especially the high growth emerging markets.

Recent Earnings Results

Toyota posted a 22.2% rise in earnings per share (EPS) to ¥31.55 (39 cents) in the third quarter of fiscal 2013 ended on Dec 31, 2012 from ¥25.81 in the same quarter of prior fiscal year. The EPS was lower than the Zacks Consensus Estimate of $1.23.

Net income rose 23.4% to ¥99.91 billion ($1.23 billion) from ¥80.94 billion a year ago. The increase was attributable to lower provision for income taxes during the quarter.

Revenues increased 9.3% to ¥5.32 trillion ($65.56 billion) on a 7.3% rise in unit sales to 2.11 million vehicles. Among all the geographic markets, unit sales rose at the fastest pace in Asia (53.4%) and declined at the fastest pace in Japan (15.0%).

Operating income dipped 16.7% to ¥124.76 billion ($1.54 billion) from ¥149.68 billion in the third quarter of previous fiscal year. The decline was attributable to a 10.1% rise in costs and expenses during the quarter.


For fiscal 2013 ending Mar 31, 2013, Toyota raised its consolidated vehicles sales guidance to 8.85 million units from 8.75 million units. Consequently, the automaker projected higher consolidated revenues of ¥21.80 trillion (reflecting an expected increase of 17.3%) compared with fiscal 2012. The upward revision of sales outlook was based on higher overseas vehicle sales, primarily in North America.


Gilead Presents Positive HCV Data

Gilead Sciences (Nasdaq:GILD) recently presented encouraging top-line data from a phase III study (Fusion), which evaluated its candidate sofosbuvir (formerly GS-7977) combined with ribavirin in patients suffering from genotypes 2 or 3 of the chronic hepatitis C virus (HCV). The study evaluated patients who did not respond to prior therapies for the disease. The patients were evaluated at 12 and 16-week courses of the candidate. Through this study, Gilead is aiming to develop an all-oral treatment regimen to combat HCV.

The phase III study met its primary efficacy objective of superiority as opposed to a predefined historic control sustained virologic response rate of 25%. Moreover, sofosbuvir was found to be safe and well tolerated. None of the patients opted out from the study due to adverse events.

We note that apart from Fusion, Gilead is evaluating sofosbuvir in HCV patients in other phase III studies including Positron, Fission and Neutrino. Gilead intends to seek regulatory approvals for the candidate in the US and EU, based on data from the studies, in the second quarter of 2013.

Successful development of sofosbuvir would not only boost Gilead's top line but also strengthen its position in the lucrative HCV market. A huge population suffers from HCV infection across the world. However, the treated population is much lower. This leaves the field open for new treatments.


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