Magna International Beats on Q2 Earnings, Ups 2014 Guidance

Zacks

Magna International Inc. (MGA) reported adjusted earnings per share of $2.37 for the second quarter of 2014, which surpassed the Zacks Consensus Estimate of $2.22. Also, earnings improved 33.1% from $1.78 in the second quarter of 2013.

Revenues went up 5.6% to $9.46 billion in the reported quarter, beating the Zacks Consensus Estimate of $9.37 billion. The beat came on the back of increased sales in North America, Europe and Asia, partially offset by a decrease in tooling, engineering and other sales, complete vehicle assembly sales and Rest of World (:ROW) production sales.

Meanwhile, vehicle production rose 3% to 4.4 million units in North America and 2% to 5.27 million units in Europe. Operating income increased 27.4% to $692 million in the quarter from $543 million in the year-ago quarter.

Segment Details

Revenues from the External Production segment (comprising North America, Europe, Asia and ROW units) went up 7.3% year over year to $7.97 billion in the reported quarter.

Sales in North America increased 10.4% to $4.75 billion, driven by product launches. Revenues from Europe hiked 4% year over year to $2.7 billion in the second quarter on new program implementations and higher dollar sales. Revenues from Asia surged 23% to $402 million in the reported quarter. The improvement is attributable to increased production and benefits from new launches in China. Revenues from ROW decreased 33% to $163 million due to lower U.S. dollar sales and production volume.

Revenues at the Complete Vehicle Assembly segment totaled $793 million compared with $796 million a year ago. Also, Assembly volumes declined 11% to 34,299 units.

Revenues from Tooling, Engineering & Other decreased 5% to $697 million in the quarter under review.

Financial

Magna International had $1.76 billion in cash and cash equivalents as of Jun 30, 2014, compared with $1.6 billion as of Dec 31, 2013. The company had long-term debt of $1.05 billion as of Jun 30, 2014, as against $332 million as of Dec 31, 2013.

In the first half of 2014, Magna International’s cash flow from operations increased to $1.07 billion from $843 million a year ago. On the other hand, capital expenditures rose to $601 million in the period from $426 million in the first half of 2013.

Capital Deployment

During the second quarter of 2014, Magna International issued $750 million of 3.625% fixed rate Senior Notes scheduled to mature on Jun 15, 2024. The company also repurchased shares worth $575 million during the quarter.

Dividend

The board of directors of Magna International declared a quarterly dividend of 38 cents per share. The dividend is payable on Sep 12, 2014 to shareholders of record as of Aug 29, 2014.

Outlook

For full-year 2014, Magna International raised its revenue guidance for the External Production segment to $29.8–$31.1 billion from $29.2–$30.5 billion. Meanwhile, Complete Vehicle Assembly sales are projected in the range of $3–$3.3 billion.

For 2014, total revenue of the company is expected between $35.6 billion and $37.3 billion, up from the previous estimate of $34.9–$36.6 billion. Operating margin is projected at around 6% with a tax rate of 24.5% while capital expenditures are anticipated at around $1.4 billion.

Magna International, based in Aurora, Canada, is a leading manufacturer and supplier of automotive components. The company designs, develops and manufactures automotive systems, assemblies, modules and components, apart from engineering and assembling complete vehicles, primarily for sale to original equipment manufacturers of cars and light trucks. The company currently carries a Zacks Rank #2 (Buy).

Better-ranked automobile stocks worth considering include STRATTEC Security Corporation (STRT), Visteon Corporation (VC) and Accuride Corp. (ACW), all of which sport a Zacks Rank #1 (Strong Buy).

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