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Shareholders of Magna International Inc. (TSE:MG) will be pleased this week, given that the stock price is up 11% to CA$110 following its latest annual results. It looks like a credible result overall - although revenues of US$33b were what the analysts expected, Magna International surprised by delivering a (statutory) profit of US$2.52 per share, an impressive 22% above what was forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the most recent consensus for Magna International from 14 analysts is for revenues of US$39.0b in 2021 which, if met, would be a meaningful 19% increase on its sales over the past 12 months. Per-share earnings are expected to surge 129% to US$5.78. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$38.5b and earnings per share (EPS) of US$5.78 in 2021. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
The consensus price target rose 25% to US$85.67despite there being no meaningful change to earnings estimates. It could be that the analystsare reflecting the predictability of Magna International's earnings by assigning a price premium. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Magna International, with the most bullish analyst valuing it at US$133 and the most bearish at US$77.50 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Magna International's rate of growth is expected to accelerate meaningfully, with the forecast 19% revenue growth noticeably faster than its historical growth of 0.8%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 14% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Magna International is expected to grow much faster than its industry.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on Magna International. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Magna International going out to 2024, and you can see them free on our platform here..
We don't want to rain on the parade too much, but we did also find 3 warning signs for Magna International that you need to be mindful of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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