Toyota shares rise for second day after ROE target announcement

(Bloomberg) — Toyota Motor Corp. shares. (TM) posted their biggest two-day rise since August on expectations of a higher return on equity after news that the Japanese automaker plans to double its target.

Most read by Bloomberg

The stock rose 6% in Tokyo, reaching a two-day gain of 11%. Shares rose on Wednesday after the Nikkei newspaper reported, citing an unidentified executive, that the company plans to increase its ROE to 20%. A spokesman said Toyota has “no explicit target or deadline” for ROE.

If the report is accurate, “the company will need to increase value chain returns to further increase profit margins,” Shinji Kakiuchi, an analyst at Morgan Stanley MUFG Securities Co., wrote in a report. “We will also ensure Toyota withdraws funds from the sale of its equity shares as part of its efforts to improve capital efficiency to further increase returns to shareholders.”

Toyota shares have risen more than 20% this year, outperforming the broader Topix index, as a weaker yen helped boost returns in the home currency. Still, the latest announcement from the world’s largest automaker showed that global sales stagnated in November as weak demand was coupled with a pause in production at two plants.

This is what other analysts and investors say about Toyota:

• Toyota first announced its 20% ROE target in its interim financial results

• The goal is ambitious; Toyota will have to take drastic measures and a large-scale shareholder return policy will be essential to achieve its goal, such as increasing the dividend or conducting buybacks

• Talks about Toyota’s 20% ROE target raise expectations of cross-shareholding unwinding and shareholder returns

• Investors were likely focused on the speed at which all of this could happen

(Adds analyst comments)

Most read by Bloomberg Businessweek

©2024 Bloomberg LP