Honda Motor Co., Ltd. (NYSE:HMC) is a prominent player in the automotive industry, known for its diverse range of vehicles, motorcycles, and power equipment. On August 6, 2025, Honda reported earnings per share of $0.31, which fell short of the estimated $0.51. Despite this, the company generated revenue of approximately $36.2 billion, slightly surpassing the estimated $36.1 billion.
The earnings shortfall is primarily due to a significant 50% decline in quarterly earnings, as highlighted by the impact of a stronger yen and a new 27.5% U.S. tariff on auto imports. This tariff, which combines an existing 2.5% rate with an additional 25% levy, resulted in a $847 million reduction in quarterly profit. Despite these challenges, Honda raised its full-year profit forecast, leading to a 1.5% increase in its share price to ¥1,572.
Honda's first-quarter operating profit fell by 50% year over year, missing the mean estimates from LSEG. The company reported an operating profit of 244.17 billion yen, below the anticipated 323.48 billion yen. However, Honda's revenue for the quarter reached 5.34 trillion yen, surpassing the mean estimates, indicating strong sales performance despite the profit decline.
The imposition of a 25% tariff on imported vehicles by the U.S. has significantly impacted Honda and other Japanese automakers. In response, these companies have been reducing prices on vehicle shipments to the U.S. A new trade deal with Japan proposes a reduced tariff rate of 15% on Japan-made vehicle imports, although the timeline for implementation remains unclear.
Honda's financial metrics reveal a relatively low valuation with a price-to-earnings (P/E) ratio of approximately 2.90 and a price-to-sales ratio of 0.10. The company's enterprise value to sales ratio is 0.099, and its enterprise value to operating cash flow ratio is 7.35, indicating strong cash flow generation. With an earnings yield of 34.52% and a debt-to-equity ratio of 0.36, Honda maintains a balanced financial position. The current ratio of 1.36 suggests healthy liquidity to cover short-term liabilities.
