Toyota Motor Corp, the world's biggest car maker, reported a 48 percent drop in quarterly operating profit on slumping Japanese car sales and a stronger yen, but lifted its full-year forecast above the market consensus.

KEY POINTS

-- October-December operating profit was 99.07 billion yen ($1.20 billion), down from 189.1 billion yen in the same period a year earlier. Net profit fell 38.9 percent to 93.63 billion yen.

-- For the year to March 31 it lifted its operating profit forecast to 550 billion yen ($6.68 billion) from 380 billion yen, after profits for the first nine months exceeded that figure.

-- It raised its global sales forecast to 7.48 million vehicles from 7.41 million, with domestic sales seen at 2.02 million vehicles compared with an earlier prediction of 1.99 million. Its U.S. forecast was unchanged at 2.09 million units

COMMENTARY

KWOK CHERN YEH, FUND MANAGER, ABERDEEN ASSET MANAGEMENT, TOKYO

The yen has been quite strong while the Korean won has been relatively favorable against the U.S. dollar. From a currency standpoint you can see the Koreans giving Japanese automakers a run for their money. Hyundai would be one company that has done quite well on that stage in recent years.

Toyota is a strong brand, very well known for reliability, so I think it will continue to do well in the medium to long term. In the short term, obviously there are concerns after the recall in the U.S. last year.

NEO CHIU YEN, VICE PRESIDENT, EQUITY RESEARCH ASIA, ABN AMRO PRIVATE BANK, SINGAPORE

In terms of revenue, it looks like it was nicely driven by Europe and Asia and other regions. On an overall basis, profit was led by the financial services segment, however autos went into the negative for the quarter.

For them to raise the yearly outlook there were slight positives from a weaker yen and contributions from stronger marketing. They changed the dollar-yen assumption from 85 to 86 for the full year.

This year should be a consolidation year for Toyota as they recover from the recall. I would like to see progress in rebalancing of their production footprint to mitigate eroding export margins. Toyota is quite dependent on the U.S. market. It would be interesting to see how the new version of their Camry model does in the U.S. this year.

YOSHIHIRO OKUMURA, HEAD OF RESEARCH, CHIBAGIN ASSETMANAGEMENT, TOKYO

Toyota is benefiting from a cut in research and development costs and lower materials expenses, which is positive for the company, as is the upward revision in its sales target. It's evidence of strong sales centered in Asia.

Its should be positive for the stock, although the outlook for the U.S. car market is still unclear.

RYOSUKE OKAZAKI, CHIEF INVESTMENT OFFICER, ITC INVESTMENTPARTNERS IN TOKYO

This is a good surprise, very good news. Based on today's closing price around 3,500 yen, I think 3,800 to 4,200 yen should be the new range.

In April they are going to announce a new management reform plan and we are waiting for this. Until then we will look for new fair value from these earnings.

YIM EUN-YOUNG, ANALYST, DONGBU SECURITIES IN SEOUL

Overall, I am positive about the global car industry this year, as it is expected to grow 7 percent this year. The growth will be slower than last year, but the growth rate is not small.

But for Toyota, it would be difficult for the carmaker to post a meaningful turnaround and regain consumer confidence until it launches fully remodeled cars in the second half, and unless the yen weakens.

KAZUYUKI TERAO, CHIEF INVESTMENT OFFICER, RCM JAPAN IN TOKYO

(The revised outlook) is slightly above the market consensus, but since the company had been widely expected to raise its forecast it's no surprise.

Compared with other Japanese automakers, Toyota has greater exposure to the domestic market and therefore is more subject to the negative impact of the country's slow economic growth. The automaker also has excess production capacity in Japan. But I think restructuring in Japan is difficult given employment issues.

In the United States, the company faces costs for its quality-related issues and uncertainty remains about how the firm can reverse the fall in its market share.

MARKET

Toyota shares closed flat at 3,490 yen ahead of the results announcement.

BACKGROUND

-- A survey of 23 analysts by Thomson Reuters I/B/E/S forecast annual operating profit of 489 billion yen for Toyota, trailing expected earnings at smaller rivals Nissan Motor Co and Honda Motor Co.

-- Nissan and Honda are also seen suffering a drop in third-quarter profits due to the stronger yen and falling demand in Japan, but the decline at Toyota is set to be the deepest given its heavier exposure to unprofitable exports from Japan.

-- Toyota exported more than half of its Japan-made vehicles last year, making a loss on many of them with the dollar well below the rate of 90 yen that President Akio Toyoda has said is the minimum to keep Japan's manufacturing sector competitive.

-- Toyota, which stayed ahead of General Motors Co as the world's biggest automaker by a thinner margin last year, built 3.28 million vehicles in Japan last year, compared with 992,000 for Honda and 1.13 million for Nissan.

(Reporting by Reuters bureau)

Toyota