FUJHY Subaru Corporation (PK)

Toyota Motor Corp. (TM) is recalling 33,000 cars, pickup trucks and commercial vehicles globally to fix a problem related to the engine, according to media reports. The vehicles being recalled include Land Cruiser Prado mid-size SUV and several larger vehicles. While most of the recalls are being made in Japan, the automaker will also be recalling 4,000 four-cylinder Tacoma pickup trucks of 2013 and 2014 base model in the U.S.

Toyota said that the problem is with the engine valve springs, which may break down, resulting in a noisy and rough performance by the engine. The glitch may also result in engine failure, subsequently halting the moving vehicle.

Toyota has made several recalls recently. On Oct 17, the automaker announced that it is recalling 885,000 Camry, Avalon and Venza vehicles worldwide to fix a problem in the air conditioning condensers. Product recalls, amid the competitive scenario, not only affect the brand but result in financial damage as well.

Toyota posted earnings per share of ¥138.26 ($1.40) in second-quarter fiscal 2014 (ending Sep 30, 2013), reflecting a strong 69.8% year-over-year rise. The company gained heavily from higher revenues, favorable currency translation and strong cost-controlling measures.

Consolidated revenues in the quarter escalated 16.2% year over year to ¥6,282.2 billion ($63.5 billion) despite a 0.5% year-over-year drop in the Automotive unit sales.

Toyota plays a pivotal role in shaping the global automobile industry. The automaker dominates the hybrid market with its Toyota and Lexus offerings as well as the Prius hybrids. Moreover, it is the leading automobile company in terms of global sales, beating General Motors (GM).

However, Toyota faces challenges from safety recalls and subdued macroeconomic factors that are detrimental to its brand image and growth prospects.

Other stocks in the automobile sector worth considering include Daimler AG (DDAIF) and Fuji Heavy Industries Ltd. (FUJHY). Both the stocks carry a Zacks Rank #1 (Strong Buy).

 
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