Nissan Motor Co., Ltd. (ADR) (NSANY)

NetscribeInterna (22.17) Submitted: 5/30/07 7:24 AM : Start Price: $21.33 NSANY Score: 27.11

Nissan Motor ended its fiscal 2007 with a lacking performance. The revenues surged 11% to Y10.469 trillion, led by increased sales from automobile sales and financing segments, as North American and European markets showed strong growth in sales. However, it is the bottom-line that left much to desire, falling by 11% to Y460.80 billion. The drop in net income can be attributed to unfavorable gross and operating margins, driven by rise in commodity prices and lower equity investment gains.





Nissans stock has been facing the brunt of slump in the net income, with stock price declining about 10% year-till-date. Moreover, there are more causes for worry as sales in U.S. light-vehicle market have been falling since the start of the year and are expected to fall in June. Thus as US market holds the key for company’s top-line growth, it will be very difficult for Nissan to achieve its $4.2 billion profit target for the fiscal year 2008 in such harsh market environment.





Going ahead, though the recent drop in Yen against the Dollar helped Nissan to cushion earnings, by increasing the value of overseas sales; this same might not be feasible in fiscal 2008 as outlook of Yen appears strong and can observe a rebound by the end of the year. Moreover, the cut throat competition and over all blurry industry outlook, amidst of rising fuel prices and growth in low margin compact cars, makes company’s credentials more bleak. Nissan has also given indications of delaying its mid term goal of selling 4.2 million vehicles in the year ending in March 2009. Further, as drop in margins are expected to continue due to higher commodity prices, while the US and Japanese market conditions are offering a stagnant growth, it will be better for an investor to stay away from Nissan at this point of time.

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