Toyota (TM) Stock Falls 3% as Tariffs and Iran War Hit Annual Profit Outlook

TLDR

• Toyota’s fiscal 2026 operating income dropped to 3.78 trillion yen from 4.79 trillion yen the prior year.
• Fiscal 2027 operating profit forecast of 3.0 trillion yen came in well below Bloomberg estimates of 4.61 trillion yen.
• Q4 net profit rose 23% year-over-year to 817.2 billion yen, beating analyst expectations.
• U.S. tariffs are projected to cost Toyota 1.38 trillion yen in operating profits; the Iran war adds roughly 670 billion yen in losses.
• TM stock fell 3.10% in U.S. trading; Tokyo-listed shares dropped 2.18%.

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Toyota (TM) stock dropped 3.10% on Friday after the automaker posted weaker annual results and issued a cautious outlook for the year ahead.

Toyota Motor Corporation, TM

The stock opened at $189.00 in U.S. trading, down $6.05 on the day. Tokyo-listed shares fell 2.18%, compared to a 0.19% decline in the Nikkei 225.

Toyota’s operating income for fiscal 2026 — the year ended March 31 — fell to 3.78 trillion yen from 4.79 trillion yen a year earlier. That’s a drop of roughly 21%.

Quarterly results were a brighter spot. Net profit for the January-March quarter came in at 817.2 billion yen, up 23% year-over-year and ahead of analyst estimates of 761.8 billion yen.

But the forward guidance overshadowed that beat.

Tariffs and the Iran War Take a Toll

Two forces are squeezing Toyota’s bottom line going into fiscal 2027.

U.S. trade tariffs on Japanese vehicles are projected to reduce operating profits by 1.38 trillion yen. The ongoing U.S.-Israel conflict with Iran is expected to cost a further 670 billion yen, or around $4.27 billion.

Toyota said the Middle East conflict is disrupting both vehicle sales and earnings in the region. It had flagged this risk in prior warnings.

The company forecast fiscal 2027 vehicle sales of 11.2 million units, slightly below the 11.3 million it sold in fiscal 2026.

Net income attributable to Toyota fell to 3.85 trillion yen from 4.77 trillion yen in the prior year.

Toyota declared a full-year dividend of 95 yen per share.

Hybrids Remain a Bright Spot

Despite the macro headwinds, hybrid vehicles — a category Toyota pioneered roughly 30 years ago — remained the company’s biggest sales driver.

Fiscal 2026 sales revenue rose to 50.68 trillion yen from 48.04 trillion yen a year earlier. Overall retail vehicle sales climbed to 11.3 million units from 11 million.

North America was the top regional contributor, followed by Japan and Europe. Asian sales declined due to increased competition in China.

Toyota forecast fiscal 2027 revenue of 51.0 trillion yen, implying modest growth in top-line figures despite the profit compression.

According to GuruFocus, Toyota’s GF Value stands at $180.17, with the stock currently trading at $189.00 — about 4.9% above that estimate.

The company’s trailing twelve-month P/E sits at 9.97x, slightly above its five-year median of 9.67x. The forward P/E is 8.91x.

No insider buying or selling activity has been reported in the past three months.

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