By Chang-Ran Kim
TOKYO, Jan 29 (Reuters) - Japanese car makers Honda Motor Co and Toyota Motor Corp look set to report healthy third-quarter earnings in the coming week as brisk sales in the United States more than made up for soft demand at home.
A fast-growing Asian car market is also expected to have driven profits in the October-December quarter, analysts said.
The auto industry has been a rare bright spot in the domestic economy due to its heavy dependence on North America, where Japan's top makers have made big strides at the expense of local competitors.
An average of five analysts' forecasts put Honda's third-quarter operating profit at 156 billion yen ($1.3 billion), up 0.8 percent from the year-earlier period when it grew 61 percent. Results are due at 3 p.m. (0600 GMT) on Friday.
But net profit was expected to jump an average 26 percent to 104 billion yen, with most analysts citing a sharp drop in costs to hedge against currency risks.
Honda, which reports results under U.S. accounting standards, had quadrupled its non-operating loss to 36 billion yen a year earlier due to the ballooning of such spending with the introduction of a new accounting rule for derivative tools.
"Following an interim results announcement that caused widespread market pessimism, a good set of third-quarter results should revive investor belief in (Honda's) earnings growth," UBS Warburg analyst Takaki Nakanishi wrote in a recent report.
Honda's shares sank after the company in October slashed its full-year operating profit forecast to 620 billion yen from 720 billion and net profit forecast to 410 billion yen from 460 billion. Rivals Toyota and Nissan Motor Co had lifted their targets.
Many analysts said Honda's projections were probably too cautious.
They said Honda should continue to speed ahead in the U.S., its most profitable market, powered by the all-new Accord -- a perennial strong seller -- as well as the popular Pilot sport utility vehicle and Element light truck, launched last month.
That, as well as growth in China and another profitable quarter in Europe, should more than offset stagnant demand at home, they said.
Honda's shares are now at 4,060 yen, having shed almost 850 yen since half-year earnings were announced in October.
PEAK FOR TOYOTA?
Analysts also expect a robust third quarter for Toyota, whose results are due on February 5, reflecting the company's bullish guidance for the full year.
Many analysts are not calculating numerical forecasts for the term because there are no year-on-year comparisons.
Japan's top automaker does not provide group forecasts, but executives have said for the full year, it would aim to surpass last year's record operating profit of 1.12 trillion yen. It expects 590 billion yen in parent-only net profit, up 17 percent.
"This fiscal year, their earnings will be good," Mitsubishi Securities analyst Shigeharu Kimishima said.
"But looking ahead, I expect the first half of next fiscal year to be difficult for Toyota."
Kimishima said that in the April-September period of last year, Toyota sold a lot of cars in the U.S. wholesale because it had to replenish depleted stock -- a result of conservative sales estimates as the country prepared for war.
Now, with inventory levels higher and car demand expected to be stagnant in the world's biggest car market, Toyota's sales won't grow as much, he said.
"Toyota's recent retail sales weren't very good in the United States. And Japan will remain a tough market for everyone since competition is fiercer here than it is in the U.S.," Kimishima said.
Toyota's shares have softened almost 130 yen since just after its last earnings announcement in late October.
Both Honda's and Toyota's shares have come under pressure in recent weeks partly in response to selling of crossheld shares by Japan's banks ahead of the fiscal-year end. ($1=118.67 yen)