2014 Forester XT. Photo: Subaru.  

To say that Fuji Heavy Industries' (FUJHY -1.65%) Subaru is having a good year is like saying Mike Tyson is a good boxer -- it just doesn't do it justice. In fact, thanks to its Impreza and Forester, Subaru has seen record-breaking sales. And the streak is likely to continue -- which, in a surprising twist, is also great news for Toyota (TM -2.18%)

The allure of an affordable AWD vehicle
When I turned 18, I got a Subaru Impreza RS, and it was a blast to drive. Moreover, it was affordable and got great gas mileage -- even with all-wheel drive -- and when I totaled it by plowing into the back of another car, neither I nor my passengers were injured. Now that I have a family, I drive a Subaru Impreza Outback Sport, and barring another accident, I'll probably drive it for years to come. It's a great car. 

2013 Subaru Impreza. Photo: Subaru.

And that's not just my opinion of Subarus. U.S. News and World Report's "Best Cars" survey ranked the 2014 Subaru Forester at No. 3 for best small SUV under $30,000, while the 2013 Impreza came in at No. 7 for best affordable compact car -- a highly competitive segment. What's more, Kiplinger awarded the Forester a place in the "12 Best Cars With the Highest Resale Value, 2013," an award that measures a vehicles overall value and appeal. Clearly, Subaru has quite a bit going for it, and that's driving sales.

Money, money, money
According to its first-quarter results, Fuji Heavy's operating income jumped 301.8%, thanks in part to surging Forester and Impreza sales. In fact, in Japan, Forester sales increased nearly fivefold and Impreza sales doubled, compared with the same time last year. Moreover, Subaru's U.S. vehicle sales rose 29.1%, while global vehicle sales rose 15.3%, for a total of approximately 191,000 units sold. That, in turn, has affected Fuji Heavy's stock, which rose from $16.10 a share last September to $51.22 as of now -- a 221% increase. 

Fuji Heavy has now raised its projected full-year net income forecast by 11 billion yen, or approximately $110.8 million. That's great news for investors. 

Other factors to consider
There's no doubt that Fuji Heavy had a strong first quarter, but there are some things to consider. First, one of the contributing factors to Fuji Heavy's operating-income jump was a favorable yen exchange gain. Second, in China -- one of the hottest-growing vehicle sales markets, Subaru sales declined 5%. The same kind of performance holds true for Japanese car manufactures as a whole, because of anti-Japanese protests in China, but unless anti-Japanese sentiment subsides, Subaru sales are unlikely to take off in China, meaning it can't capitalize on that growth potential.

What to watch
Putting aside lackluster sales in China and the yen exchange gains, Subaru sales are booming, and that's great news for Fuji Heavy. Further, thanks to its automobile partnership -- Subaru and Toyota collaborated on a two-door sports coupe -- and a 16.5% stake in Fuji Heavy, Toyota is also reaping these benefits.

Thanks to Subaru's high-demand, Fuji Heavy is investing $400 million, and hiring 900 workers, to expand its Indiana manufacturing plant. Starting in 2016, this move will help increase production of the Impreza to more than 300,000 a year and will help improve sales of the model, which saw a decline earlier this year -- because of a lack of inventory.

Fuji Heavy looks to have a promising future.