Rising exports helped lift profits 16% to $1.37 billion. While consolidated revenue rose 12.7%, using a constant currency, top-line growth came in at a lower but still respectable 5.9%. Operating income for the quarter increased 8.9% to $1.8 billion. Several factors contributed to these numbers, including higher revenue and the positive impact of the currency effects. This was more than enough to offset the negative impact of increased sales incentives in North America, as well as the substantially increased raw material costs, SG&A expenses, and R&D expenses.
Although difficult to decipher, the quarter's strength can be seen in its worldwide increase of the number of cars; unit growth was 5.6%, offsetting weakness in Japan. Looking ahead, car sales should be strong and incentives should slow in the coming quarters. Older models are being phased out, thus the push to clear the inventory. But new product launches later this year from its popular Accord, Civic, and Fit/Jazz subcompact should give a lift to sales and boost margins, as I wouldn't expect these to experience much in the way of discounting. Investors who focus merely on the favorable currency benefits may be missing the ride.
The well-documented woes of U.S. car manufacturers can only help Honda. Even Nissan
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Fool contributor Larry Rothman is happy to receive feedback, and promises to read it when not being wrestled by his three children. He doesn't have any positions in the companies mentioned. The Motley Fool has a disclosure policy.