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Magna (MGA) Earnings Surpass Estimates in Q3, Decline Y/Y

Zacks Equity Research

Magna International Inc. MGA delivered adjusted earnings per share of $1.41 in third-quarter 2019, beating the Zacks Consensus Estimate of $1.38, mainly aided by increased revenues at the Seating Systems and Complete Vehicles segment. However, the bottom line declined from the year-ago quarter’s $1.56.

The company’s revenues declined 3% year over year to $9,319 million owing to unfavorable foreign currency translation and divestitures. However, the metric surpassed the Zacks Consensus Estimate of $9,305 million.

Adjusted EBIT declined to $558 million from the year-ago figure of $699 million, thanks to the General Motors strike and net customer price concessions.

Magna International Inc. Price, Consensus and EPS Surprise

 

Magna International Inc. Price, Consensus and EPS Surprise

Magna International Inc. price-consensus-eps-surprise-chart | Magna International Inc. Quote

Segmental Performances

Revenues at the Body Exteriors & Structures segment fell 5% year over year to $4 billion in the reported quarter due to lower vehicle production, the General Motors strike, unfavorable foreign currency translation, and net customer price concessions. Adjusted EBIT declined to $306 million from the prior-year quarter’s $326 million, reflecting lower scrap steel recoveries as well as higher commodity, warranty and launch costs.

Revenues at the Power & Vision segment fell to $2.7 billion from the prior-year figure of $2.9 billion, largely due to negative foreign currency translation, lower vehicle production, the GM strike and net customer price concessions. Adjusted EBIT declined to $167 million from $259 million in third-quarter 2018, mainly because of higher engineering and other costs in the company’s ADAS business, and lower equity income.

Revenues at the Seating Systems segment rose to $1,266 million in the quarter under review from the prior-year $1,219 million owing to programs launches and the acquisition of VIZA. Adjusted EBIT declined to $56 million from $69 million recorded in the prior year. The decline was largely due to lower sales at a number of facilities, higher commodity costs, launch costs and operational inefficiencies at the South Carolina facility.

Revenues at the Complete Vehicles segment rose 9% year over year to $1.5 billion, primarily driven by the launches of BMW Z4 and Toyota Supra programs as well as continued ramp-up of the Mercedes G-Class and Jaguar I-PACE. Adjusted EBIT grew to $29 million from $24 million in third-quarter 2018 on higher sales, and lower launch and other costs.

Financials

Magna had $769 million of cash and cash equivalents as of Sep 30, 2019, compared with $684 million as of Dec 31, 2018. It had long-term debt of $3,021 million as of Sep 30, 2019, reflecting a decline from $3,084 million recorded as of Dec 31, 2018. The debt-to-capital ratio stands at 21.19%, as of Sep 30, 2019.

At the end of third-quarter 2019, the company’s cash flow from operations was $750 million, in comparison with $1.08 billion at the end of third-quarter 2018.

Share Buyback & Dividend

During the September-end quarter, the company repurchased 6.8 million shares of common stock for $342 million.

Magna’s board of directors announced a dividend of 36.5 cents per share for the third quarter of 2019, reaching the total to $109 million.

Guidance

For 2019, the company projects consolidated revenues in the range of $38.7-$39.8 billion, down from previously mentioned $38.9-$41.1 billion.

The company anticipates adjusted EBIT margin of 6.3-6.5%, reflecting a drop from the prior guidance of 6.6-6.9%.

Magna’s free cash flow expectations remain at the range of $1.9-$2.1 billion despite the lowering of the consolidated sales and margins projections for 2019.

Zacks Rank & Stocks to Consider

Currently, Magna has a Zacks Rank #3 (Hold).

A few better-ranked stocks in the Auto-Tires-Trucks sector are Spartan Motors, Inc. SPAR, SPX Corporation SPXC and BRP Inc. DOOO, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Spartan Motors has an estimated earnings growth rate of 85.42% for the ongoing year. The company’s shares have surged 117.3% in a year’s time.

SPX has an expected earnings growth rate of 23.18% for 2019. The company’s shares have surged 58.5% in the past year.

BRP has a projected earnings growth rate of 18.49% for the current year. Its shares have gained around 21.7% over the past year.

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