As the Japanese yen weakens against the U.S. dollar this year, the dynamics of Japan’s stock market are shifting, creating unique opportunities for investors. So, let’s look at fundamentally sound Japanese stocks Sony Group Corporation (SONY), Mitsui & Co., Ltd. (MITSY), and Honda Motor Co., Ltd. (HMC) that will likely gain from the current currency trends.
Japan’s economy is dealing with a crisis surrounding the nation’s currency, the yen. The currency’s exchange rate has been witnessing a continued slide this year, toughing a 38-year low of around $161 to the U.S. dollar on July 3. However, the yen’s downtrend has reversed lately, after the Bank of Japan’s July 31 decision to increase interest rates.
The Japanese yen grew towards 146 per dollar, rebounding from two-week lows and tracking a rally in Japanese government bond yields amid a hawkish stance on Bank of Japan monetary policy. Despite the recent surge in the yen, it is still trading at multi-decade lows, and investors must keep an eye on companies that stand to benefit from this trend.
Sectors such as manufacturing, automotive, and technology stand out as particularly attractive during this period, with companies in these industries likely to see enhanced earnings due to favorable exchange rates. Thus, Japanese stocks such as SONY, MITSY, and HMC could be ideal watchlist additions as they can capitalize on the current currency trends.
Let’s discuss the fundamentals of the featured stocks in detail:
Sony Group Corporation (SONY)
Based in Tokyo, Japan, SONY designs, develops, produces, and sells electronic equipment, instruments, and devices for the consumer, professional, and industrial markets globally. It distributes software titles and add-on content via digital networks; network services related to game, video, and music content; and home gaming consoles and peripheral devices.
On April 17, 2024, Sony Electronics, a subsidiary of Sony Corporation of America and an affiliate of SONY, introduced a new line of home audio products under the new BRAVIA Theater brand name. The BRAVIA Theater Line-up provides soundbars, a home theater system, and a neckband speaker for immersive cinematic sound.
These new product launches will offer an upgraded cinematic experience to consumers in their homes and will drive the company’s profitability and growth.
SONY’s trailing-12-month net income margin of 7.53% is 63.5% higher than the industry average of 4.61%. Likewise, the stock’s trailing-12-month EBIT margin of 9.28% is 18.2% higher than the 7.85% industry average.
For the first quarter that ended June 30, 2024, SONY’s sales and financial services revenue increased 1.6% year-over-year to ¥3.01 trillion ($20.53 billion). Its operating income was ¥279.11 billion ($1.90 billion), up 10.3% from the year-ago value. The company’s adjusted EBITDA grew 13.5% year-over-year to ¥461.26 billion ($3.15 billion).
Further, the company’s net income and earnings per share were ¥234.83 billion ($1.60 billion) and ¥189.43, increases of 8.2% and 7.8% from the prior year’s period, respectively.
Analysts expect SONY’s revenue for the second quarter (ending September 2024) to increase 10.6% year-over-year to $20.67 billion. The consensus EPS estimate of $1.39 for the current quarter indicates an improvement of 29.3% year-over-year. Also, the company has surpassed consensus EPS estimates in three of the trailing four quarters, which is impressive.
Shares of SONY have gained 13.7% over the past month and 18.5% over the past year to close the last trading session at $97.56.
SONY’s POWR Ratings reflect its bright prospects. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
SONY has an A grade for Sentiment. It is ranked #3 out of 12 stocks in the Entertainment – Media Producers industry.
In addition to the POWR Ratings highlighted above, one can access SONY’s ratings for Growth, Value, Momentum, Quality, and Stability here.
Mitsui & Co., Ltd. (MITSY)
MITSY operates as a global trading and investment company. The Japan-based company engages in the manufacture and sale of steel products; steel processing, maintenance, and recycling activities; development, and trading of mineral and metal resources; and upstream development, logistics, and trading of energy resources, such as natural gas/LNG, oil, and coal.
In terms of forward EV/Sales, MITSY is trading at 0.96x, 48.5% lower than the industry average of 1.85x. Also, the stock’s forward Price/Sales multiple of 0.66 is 55.7% lower than the industry average of 1.48.
During the three-month period that ended June 30, 2024, MITSY’s revenue increased 21.9% year-over-year to JPY 3.84 trillion ($26.19 billion). Its profit before income taxes rose 11.5% from the previous year’s quarter to JPY 347.69 billion ($2.37 billion). Its profit for the period grew 9.2% year-over-year to JPY 282.35 billion ($1.93 billion).
In addition, the company’s earnings per share attributable to owners of the parent were JPY 92.37, up 11.1% from the same period of 2023. Also, MITSY’s total assets amounted to JPY 17.98 trillion ($122.62 billion) as of June 30, 2024, compared to JPY 16.90 trillion ($115.25 billion) as of March 31, 2024.
Street expects MITSY’s revenue for the second quarter (ending September 2024) to increase 10.3% year-over-year to $23.50 billion. Similarly, the company’s revenue for the fiscal year (ending March 2025) is expected to grow 305.7% year-over-year to $95.70 billion.
MITSY’s stock has surged 15.3% year-to-date and 16.8% over the past year to close the last trading session at $431.
MITSY’s sound fundamentals are reflected in its POWR Ratings. The stock has a B grade for Sentiment and Stability. It is ranked #25 among 31 stocks in the B-rated Steel industry.
You can access MITSY’s ratings for Growth, Value, Momentum, and Quality here.
Honda Motor Co., Ltd. (HMC)
Headquartered in Tokyo, Japan, HMC develops, manufactures, and distributes motorcycles, automobiles, power, and other products internationally. The company operates through four segments: Motorcycle Business; Automobile Business; Financial Services Business; and Power Product and Other Businesses.
On June 13, HMC and Emporia Corp. announced a collaboration to boost innovation in the home energy management sector. Under this agreement, Honda made a strategic investment in Emporia and will focus on key areas like smart EV charging and home energy management, combining the strengths of both companies to deliver cutting-edge solutions.
Manabu Ozawa, chief officer of Honda Corporate Strategy Operations, “Our collaboration with Emporia aims to advance Honda's path toward carbon neutrality, enable customers to extract additional value from their EVs, and expand our energy services as we transition to our electrified future."
In April, HMC unveiled the Ye Series, an all-new EV series the company will introduce to China, including the world premiere of the first set of the Ye Series models, namely Ye P7 and Ye S7, and the concept model for the second set of series models, the Ye GT CONCEPT. The company plans to launch six EVs in China by 2027.
HMC’s sales revenue for the first quarter that ended June 31, 2024, increased 16.9% year-over-year to ¥5.40 trillion ($36.83 billion). Its operating profit rose 35.4% from the year-ago value to ¥484.71 billion ($3.31 billion). Its profit for the period and EPS came in at ¥414.33 billion ($2.83 billion) and ¥81.81, up 8.2% and 12% from the previous year’s period, respectively.
Analysts expect HMC’s revenue and EPS for the fiscal year (ending March 2025) to increase 402.9% and 3.7% year-over-year to $146.70 billion and $4.52, respectively. Over the past month, the stock has soared 3.5% and 6.6% year-to-date to close the last trading session at $32.95.
HMC’s POWR Ratings reflect its promising outlook. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
HMC has an A grade for Sentiment and a B for Stability, Value, and Quality. Within the Auto & Vehicle Manufacturers industry, it is ranked #5 out of 51 stocks.
Click here for the additional POWR Ratings for HMC (Momentum and Growth).
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SONY shares were trading at $96.42 per share on Tuesday morning, down $1.14 (-1.17%). Year-to-date, SONY has gained 2.07%, versus a 17.58% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
3 Japanese Stocks to Watch as the Yen Weakens StockNews.com
