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Magna International (MGA) Plans EUR 1.24B Expansion in Europe

Zacks Equity Research

Magna International Inc. MGA plans to invest up to €1.24 billion ($1.3 billion) in Slovenia, including the construction of a fully functional car plant. The plant is expected to have a capacity of 100,000–200,000 units per year and the investment is expected to create about 6,000 jobs.

Magna International has submitted an outline of the proposed plan to the government, which is likely to be concluded in four phases. However, a particular time frame or a possible date on which the investment decision would be finalized has not been provided yet. The company’s Austrian facility has been operating at full capacity and has been receiving new business contracts. This in turn had led to the car part manufacturer to consider the construction of a new plant in Europe.

The Slovenian government is focused on attracting foreign investments and has decided to provide roughly €25 million financial support to three industry investment projects. Magna International has been awarded €18.6 million, the largest share, as part of this plan.

In Jan 2017, Magna International revealed plans to build a new paint shop in Slovenia. The company’s expansion strategies are expected to benefit the company in the long term. Last year Magna International opened a new facility in Queretaro, Mexico, a new seating manufacturing facility in Taizhou, China and a new seating engineering center in the Xuhui District of Shanghai, China.

Price Performance

Magna International has underperformed the Zacks categorized Auto/Truck-Original Equipment Market industry over the last year. During the aforesaid period while the stock gained 3.9%, the industry rallied 22.5%.

Zacks Rank & Key Picks

Magna International currently carries a Zacks Rank #3 (Hold).

Better-ranked companies in the auto space include Ferrari N.V. RACE, American Axle & Manufacturing Holdings, Inc. AXL and Lear Corporation LEA. All the three companies carry a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank  stocks here.

Ferrari has an expected long-term growth rate of 16.5%.

American Axle has an expected long-term growth rate of 8.1%.

Lear has an expected long-term growth rate of 8.9%.

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