Shares of the world's largest automaker soared to their highest level in 40 years

Toyota shares surged by more than 16% during trading in Tokyo. This marked the largest single-day gain in nearly four decades—since 1987. The sharp jump came after the company released its earnings report, in which it announced a 34% increase in quarterly profit and raised its annual forecast, according to Bloomberg.

Toyota’s operating profit rose 34% year-over-year in the last quarter—to 1.127 trillion yen ($7.1 billion). This exceeded analysts’ median forecast by 13.6% and marked the first increase in the metric in six quarters, according to Bloomberg. The weakening of the yen amplified the impact of overseas revenue, while demand for hybrid vehicles remained steady.

Revenue increased by 8.6% to 13.437 trillion yen ($84.8 billion), but net income fell by 18.5% to 759.4 billion yen ($4.8 billion).

On the back of strong quarterly results, Toyota raised its operating profit forecast for the current fiscal year, which ends in March 2027, by 15% to 3.9 trillion yen ($24.7 billion).

In addition, the automaker expanded its share buyback program: the upper limit for the current fiscal year was raised by 30%—to 1.3 trillion yen—and up to 14 trillion yen will be allocated to shareholder distributions over the next five years.

At the same time, the Toyota Group’s annual sales target was lowered by 1.7% to 10.99 million units. This is due to the ongoing downturn in China, where foreign brands are losing ground to local manufacturers, led by BYD. The outlook for the Chinese market remains challenging: according to estimates by the Passenger Car Association, car sales there will fall by 22% this year and grow by only 2% in 2027, Bloomberg reports.

To turn the situation around, Toyota is building a new plant in Shanghai, where it will manufacture Lexus electric vehicles. According to the company’s CFO, Yoichi Miyazaki, production is scheduled to begin in September, and the main goal is to reduce the development time for new models to 18 months.

Toyota’s financial stability is remarkable given all the headwinds it faces, noted Tatsuo Yoshida, a senior automotive analyst at Bloomberg Intelligence. “Compared with other Japanese automakers, Toyota has relatively few obvious weaknesses,” he said. Nevertheless, “competition from Chinese automakers remains a serious challenge not only in China but also, increasingly, in overseas markets,” Yoshida said.

The overwhelming majority of analysts recommend buying Toyota stock—the company has 14 “bullish” ratings out of 19. The average price target is 3,677.11 yen—taking into account the rally on November 5, this target implies growth potential of less than 4%.

This article was AI-translated and verified by a human editor