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American Honda Finance

Honda's somewhat more diversified business portfolio, which includes Automobile, Motorcycle, Power Products and financial services businesses helps to distinguish it from Toyota and Nissan. Indeed, even as the automotive segment remains the largest driver of consolidated profits, this degree of differentiation helps anchors the firm's free cash flow generation and provide earnings stability. Automobile is Honda's largest business segment (73% of FY17 sales) followed by Financial Services at 13.6%, Motorcycle at 12.5%, with Power Product and Other accounting for the balance. Notably, Honda is the largest motorcycle producer in the world, and is the second largest in the US behind Harley-Davidson. Within the Automobile segment, the NA region accounted for 53% of FY17 global unit sales followed by Asia (19%), Japan (16%), Other (7%) and Europe (5%). Motorcycle sales are largely centered around Asia, where the segment generates 85% of revenues, followed by Other (9%), North America (3%), Europe (2%), and Japan (1%). (26 Sep 2017)

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ESG and Automotive: Ratings and Methodology

Sector Analysis: 14 Nov 2018, 10:23 PM ET - In this piece we discuss our ESG Ratings framework as it pertains to the Automotive sector. We use a total of 13 distinct measures to score each of the 3 ESG parameters and then weight them individually.

FCA 3Q18: Inching towards IG?

Earnings Note: 30 Oct 2018, 10:10 PM ET - FCA is struggling with the challenging market environment alongside its auto-OEM peers, but continues to perform well and improve its balance sheet strength as it inches closer to IG ratings.

LKQ 3Q18: Focus on Delevering, New Share Buyback

Earnings Note: 25 Oct 2018, 7:44 PM ET - LKQ reported further margin pressure and lowered its FCF guidance, and announced a share buyback program. But deleveraging the balance sheet still remains a focus at LKQ as well.

China Autos: Slowing Demand Concerns

Sector Analysis: 18 Oct 2018, 7:02 AM ET - September passenger vehicle sales in China marked the third consecutive month of YoY declines. While YTD sales are still up 0.4%, 2018 is already shaping up to be the weakest growth year for the critical China automotive industry. 

IG Note: US Autos Underperformance – Long End Pain

IG Note: 15 Oct 2018, 3:49 AM ET - Autos is the worst performing IG Sector in the YTD18 period, with the long end bonds of Ford and GM driving the underperformance. 
Focused

American Honda Finance: Healthy NIC

IG Note: 03 Oct 2018, 10:28 AM ET - American Honda Finance is in the market with 3Y floating as well as 3Y and 5Y fixed offerings. We  would view any new issue concession as an opportunity for investors to gain exposure to this high quality captive finance company.

Delphi Technologies: Softer Outlook, Move To M/P

Earnings Note: 08 Aug 2018, 9:34 PM ET - Delphi reported a softer-than-expected of 2Q18 results and downwardly revised its FY18 guidance outlays. We view further credit metric improvement as limited over the near-term and, accordingly, move to M/P.

Cooper Tire: 2Q18 | Muted Outlook

Worth Watching: 06 Aug 2018, 10:29 PM ET - Cooper Tire (B1/BB) recorded modest 2Q18 results, reporting both top and bottom line contraction for the second consecutive quarter. The firm saw revenue fall 3.1%, driven primarily by lower tire volumes as well as the impact of weaker price an ..

Cooper-Standard: 2Q18 | Mixed Performance

Worth Watching: 01 Aug 2018, 11:58 PM ET - Cooper-Standard (B1/B+) reported an all-time high for second quarter sales, but a weaker than expected volume mix and unstable market conditions impacted its bottom line. The company saw modest 2.1% revenue expansion, improving to a quarterly h ..

Meritor: 3Q18 | Keep on Trucking

Worth Watching: 01 Aug 2018, 11:57 PM ET - Meritor (B2/BB-) recorded healthy growth in its third quarter, despite the unfavorable impact of rising commodity costs. Sales were up 22.7% YoY, to $1.1 bn, driven by higher production across the board, and one of the highest North American ma ..

Autoliv: 2Q18 | Moving Forward

Worth Watching: 30 Jul 2018, 12:27 PM ET - Autoliv (A2/A-) reported steady growth in its second quarter despite rising raw material prices against the backdrop of rising trade tensions. Consolidated sales grew 11.5% to $2.2 bn, driven by a 4.2% positive impact stemming from currency tra ..

Tenneco: 2Q18 | Margins Pressured

Worth Watching: 29 Jul 2018, 10:40 PM ET - Tenneco reported strong second quarter results, recording top line expansion and still healthy bottom line performance. For the quarter, TEN's value-add revenue increased 8.0% (+6.0% constant currency), to $1.92 bn, supported by healthy growth ..

BorgWarner: 2Q18 | Steady Ahead

Worth Watching: 26 Jul 2018, 11:27 PM ET - BorgWarner (Baa1/BBB+) delivered a strong second quarter performance despite weaker than expected industry volume. The firm reported revenues of $2.69 bn, a 12.7% increase compared to the second quarter of 2017 (+7.3% organic). The expansion oc ..

US IG Strategy: Picks and Pans (July 2018)

Strategy Analysis: 23 Jul 2018, 4:36 AM ET - In this document we summarize our sector recommendations, and provide a few names within each that we like (picks) and dislike (pans). Our Picks and Pans reflect our analysts' current views. 

Euro Auto OEMs: US Tariff Trials and Tribulations

Sector Analysis: 11 Jul 2018, 10:02 PM ET - We frame the potential financial implications of EU-US tariffs across Euro OEMs and while no OEM comes out as a winner, FCA sees less pain while JLR comes out as more exposed. 

Car Rental: Section 232, Used Cars, Fleet Risk

Sector Outlook: 11 Jul 2018, 11:52 AM ET - We ponder the Section 232 auto threats and the more immediate questions on used car prices, new vs. used car affordability, daily car rental fleet replacement cycles, and a fresh test of pricing power in car rental.

US High Yield Conference Transcript: Tesla

Transcript: 11 Jul 2018, 10:58 AM ET - We provide a transcript of our presentation on Tesla from the New York US High Yield Conference conducted on June 19th 2018.
Focused

American Honda Finance: Attractive New Issue

IG Note: 11 Jul 2018, 10:45 AM ET - American Honda Finance is in the market with 2Y floating as well as 2Y and 5Y fixed offerings. We  would view any new issue concession as an opportunity for investors to gain exposure to this high quality captive finance company.

Toyota Motor Corp: Multi-Tranche Issuance

IG Note: 10 Jul 2018, 11:55 AM ET - Toyota Motor Corp (parent) is in the market this morning with 3Y, 5Y and 10Y fixed offerings. We remain at an underperfom on Toyota family bonds, but would view a +5 bp concession to secondary as attractive.

Trade: Autos as War Trigger?

Strategy Analysis: 26 Jun 2018, 12:25 PM ET - The US auto trade flow numbers show enormous stakes for all involved. The value-added mix and the intertwined supplier-to-OEM production chain complexities are not captured in the trade deficit numbers and understate the risks.  

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