Toyota and BMW better analyst estimates

Surprise results raise optimism among investors

Toyota Motor Corp, the world’s largest auto maker, narrowed its net loss forecast and Bayerische Motoren Werke AG reported a surprise profit, raising optimism among investors the slump in car sales has bottomed.

“The worst is over,” said Masayuki Kubota, a senior fund manager in Tokyo at Daiwa SB Investments Ltd, which oversees the equivalent of $37 billion in assets. “Auto makers have more fixed costs than other industries and in recessions their performances plunge, but in recoveries they do very well.”

The two car makers joined Honda Motor Co, Ford Motor Co and Nissan Motor Co in surpassing analysts’ earnings estimates. Government-backed rebates in the US, the so-called “cash for clunkers” program pushed the annual sales pace to 11.2 million vehicles last month, the highest for 2009.

“Toyota is positioning itself to recover nicely as the world car market turns up,” said Edwin Merner, who helps manage about $3 billion at Atlantis Investment Research in Tokyo. “They continue to have very conservative earnings forecasts, which they should be able to beat nicely.”

Toyota forecast a net loss of 450 billion yen ($4.7 billion) in the year ending March, compared with an earlier forecast of 550 billion yen, the Toyota City, Japan-based carmaker said in a statement today.

BMW, the world’s biggest maker of luxury vehicles, posted second-quarter net income of ¤119 million ($171 million) compared with a median estimate of a loss of ¤112 million in a Bloomberg News survey of seven analysts.

“That’s a good clean result in a tough environment,” said Mike Tyndall, an analyst with Nomura Securities in London. “BMW is reaping the benefits from cutting production early and reducing costs.”

“Highly volatile” car markets make an earnings forecast for 2009 impossible, Munich-based BMW said. The company said it still forecasts a drop in full-year sales, with second-half deliveries “expected to stop the downwards trend” of the first six months.

Ford and Honda also posted surprise profits last month and Honda raised its full-year profit forecast. Nissan’s loss was smaller than estimated by analysts. Daimler AG’s Mercedes-Benz division and Toyota’s Lexus brand, BMW’s main rivals, posted their highest US sales this year in July. The luxury models are generally ineligible for government incentives. The drop for the BMW brand in the US last month was 32 per cent.

BMW fell as much as ¤1.75, or 5.3 per cent, to ¤31.17, the biggest intraday decline since April 28, and was down 3.9 per cent as of 12.30 pm in Frankfurt trading. That pared the stock’s gain this year to 46 per cent.

The manufacturer’s automotive division reported a second-quarter pretax loss of ¤158 million versus a year-earlier profit of ¤325 million.