Panasonic Jumps Most Since 1974 After Profit Beats Estimates

Feb 05, 2014 10:44 am ET

(Adds U.S. trading in fifth paragraph.)

Feb. 5 (Bloomberg) -- Panasonic Corp., Japan’s biggest maker of consumer electronics, surged the most since at least 1974 after posting third-quarter profit that was 68 percent higher than analyst estimates.

The stock rose 19 percent to 1,262 yen at the close of trade in Tokyo. At least two brokerages raised their ratings after the company said net income rose 20 percent to 73.7 billion yen ($730 million), compared with the 44 billion-yen average estimate of three analysts surveyed by Bloomberg News.

President Kazuhiro Tsuga, in his second year at the helm, is pivoting toward products for cars and homes as he accelerates changes to recover from back-to-back annual losses. Panasonic suspended plasma panel production, trimmed smartphone and circuit board operations and sold a stake in semiconductor factories to focus on growing businesses.

“Management plans to bring restructuring further forward,” Mika Nishimura, an analyst at Mitsubishi UFJ Morgan Stanley Securities Co., said in a report as the stock was raised to outperform from neutral. “Combined with sales growth mainly from automotive products, this could boost earnings sooner than we expected.”

Panasonic’s American depositary receipts rose as much as 10 percent, the biggest intraday gain in a year. The ADRs advanced 9.7 percent to $12.42 at 10:39 a.m. New York time.

Shares of Panasonic also were raised to outperform from neutral at Macquarie Group Ltd.

Toyota, Tesla

Operating profit at Panasonic’s automotive and industrial systems unit, the company’s biggest that handles products such as car entertainment systems and batteries, was 28.2 billion yen in the three months ended December, the company said. That compares with a loss of 800 million yen the year before.

The company supplies lithium-ion batteries to automakers including Toyota Motor Corp. In October, Panasonic won a contract to supply 2 billion battery cells to Tesla Motors Inc. in the four years through 2017.

“We’re promoting reform much faster than we had originally planned,” Chief Financial Officer Hideaki Kawai said yesterday. “We won’t slow down.”

Profit at the audio-visual product division was 10.1 billion yen, compared with a loss of 10.9 billion yen a year earlier. The appliances unit recorded earnings that rose 60 percent to 9.8 billion yen from a year earlier.

Panasonic’s group operating profit more than tripled to 116.6 billion yen in the third quarter on a 10 percent increase in sales to about 2 trillion yen.

The company kept unchanged its forecasts of annual operating profit of 270 billion yen and net income of 100 billion yen.

‘Very Conservative’

The company may post full-year operating earnings of 287 billion yen and net income of 118 billion yen, according to the average of 19 analyst estimates compiled by Bloomberg.

“The firm’s comments leave the impression that its fourth quarter assumptions are very conservative,” Masahiro Ono and Hiroshi Taguchi, analysts at Morgan Stanley MUFG Securities Co. in Tokyo, wrote in a report. “We expect consensus expectations of full-year results to move higher.”

Panasonic, which makes products ranging from eyelash curlers to solar panels and car-navigation systems, eliminated 32,000 jobs as of September from a year earlier. Tsuga, who took control in June 2012, said he plans to eliminate unprofitable divisions by March 2016.

The company plans to double revenue to 2 trillion yen by March 2019 from automobile-related products such as drive- control systems as part of Tsuga’s plan to cut reliance on consumer electronics. Panasonic is also looking to expand in housing-related products.

--With assistance from Grace Huang in Tokyo. Editors: Robert Fenner, Michael Tighe