It has been about a month since the last earnings report for Magna (MGA). Shares have lost about 6.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Magna due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Magna Earnings Lag Estimates in Q1, Revenues Beat
Magna delivered adjusted earnings per share of $1.63 in first-quarter 2019, missing the Zacks Consensus Estimate of $1.73. Further, the bottom line was lower than the year-ago quarter’s figure of $1.84.
Revenues decreased 2% year over year to $10.6 billion. However, the top line surpassed the Zacks Consensus Estimate of $10.5 billion. This plunge in sales was due to a 7% decline in global light-vehicle production, which includes a 17% slump in China, and 3% decline in North America and Europe each.
Adjusted EBIT declined to $720 million from the year-ago figure of $875 million.
Revenues at the Body Exteriors & Structures segment decreased 3% year over year to $4.3 billion in the reported quarter. Adjusted EBIT rose to $363 million from the prior-year quarter’s figure of $343 million.
Revenues at the Power & Vision segment decreased 1% year over year to $3.1 billion. Adjusted EBIT declined to $216 million from $359 million in first-quarter 2018.
Revenues from the Seating Systems segment declined 3% year over year to $1.43 billion in the quarter under review. Adjusted EBIT declined to $94 million from $130 million recorded in the prior year.
Revenues at the Complete Vehicles segment increased 16% year over year to $1.93 billion. Adjusted EBIT increased to $28 million from $19 million in first-quarter 2018.
Magna had $925 million of cash and cash equivalents as of Mar 31, 2019, compared with $684 million as of Dec 31, 2018. It had long-term debt of $3.1 billion as of Mar 31, 2019, similar to the figure recorded as of Dec 31, 2018.
At the end of first-quarter 2019, the company’s cash flow from operations was $594 million in comparison with $577 million recorded in the first quarter of 2018.
Magna’s board of directors announced a dividend of 36.5 cents per share for the first quarter that led to a $119-million payment. This dividend will be paid on Jun 7, 2019, to shareholders of record as of May 24, 2019.
During the reported quarter, the company repurchased 5.6 million shares for $284 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -10.17% due to these changes.
Currently, Magna has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Magna has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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