SEOUL -- Hyundai Motor Co. is expected to post only a slim 4 percent gain in third-quarter earnings after a labor strike hit production, denting both exports and sales in a recovering domestic market.
A post-strike order backlog, a weakening won currency and profits from affiliates bode well, but an uncertain U.S. economy clouds the outlook, analysts said.
Problems at General Motors and Ford Motor Co. could allow Hyundai and Japanese rivals such as Toyota Motor Corp. and Honda Motor Co. Ltd. to sell more cars in the world's biggest auto market, but may also intensify a damaging price war.
In May, Hyundai opened its first U.S. plant in Alabama as a step toward its goal of becoming the world's sixth-largest automaker by 2010 along with affiliate Kia Motors Corp. Currently it ranks seventh.
Hyundai is due to report its results on Thursday, Oct. 27.
Hyundai is expected to earn 469.0 billion won ($442.4 million) in third-quarter net profit, up from 450.2 billion won a year ago but down from 613.2 billion won in the second quarter, according to a Reuters poll of eight analysts.
Full-year net profit is forecast to rise 22 percent to 2.19 trillion won, and jump another 17 percent to 2.56 trillion won in 2006, according to Reuters Estimates.
"Weak growth in the third-quarter performance is predicted due to one-offs like the labor strike. The share price has already priced that in," said Choi Dae-sik, analyst at CJ Investment and Securities.
Hyundai stock has dropped 9.4 percent this month, underperforming a 3 percent fall in the broad index.
According to Reuters Estimates, 19 analysts have a 100,000 won target price for Hyundai shares, more than a third higher than Monday's close of 73,800 won. Eighteen rate the stock 'outperform' or 'buy'.
STRIKE HITS EXPORTS
Hyundai's 42,000-strong labor union went on strike for several hours a day between Aug. 25 and Sept. 8 to press their case during wage negotiations, delaying production of popular models such as the Grandeur and Sonata sedans.
Exports, accounting for two-thirds of Hyundai's total sales, fell 17 percent in July-September from a year ago, pushing total sales volume down by 11 percent, according to company data.
Third-quarter revenue is expected to fall 4.3 percent to 6.26 trillion won from 6.54 trillion won a year before.
Last week, Ford said it swung to a loss in the third quarter as sales of sport utility vehicles declined. GM reported a $1.6 billion quarterly loss.
A weakening won and improved brand image should help Hyundai take advantage of GM and Ford's woes in the U.S., while improving demand at home looks well-timed.
"In the fourth quarter, a normalized factory operation, a weaker won and recovering domestic demand will lift sales, along with the launch of a follow-up to the Santa Fe SUV in November," said Suh Sung-moon, analyst at Korea Investment Securities.
Based on analysts' third-quarter and full-year forecasts, Hyundai's October-December net profit will likely jump 57 percent to 598 billion won from 381 billion won a year ago.
A stronger won has hurt Hyundai's exports.
The currency has lost 6.5 percent versus the dollar since hitting a 2005 high of 989 per dollar in early March, although it is still up 7.3 percent from a year ago.