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Magna (MGA) Q4 Earnings & Revenues Top Estimates, Down Y/Y

Zacks Equity Research

Magna International Inc. MGA delivered adjusted earnings per share of $1.41 in fourth-quarter 2019, beating the Zacks Consensus Estimate of $1.32. Stellar revenues in the Body Exteriors & Structures, Power & Vision and Seating Systems segments led to this outperformance. However, the bottom-line figure declined from the year-ago quarter’s $1.63.

The company’s revenues declined 7.3% year over year to $9,395 million due to a drop in light vehicle production in North America, the General Motors GM strike, unfavorable foreign-currency translation impact and divestiture of the Fluid Pressure & Controls (FP&C) business. However, the reported figure surpassed the Zacks Consensus Estimate of $9,187 million.

Adjusted EBIT slid to $590 million from the year-ago figure of $730 million, primarily due to softer sales.

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

The Body Exteriors & Structures segment revenues dropped 6% year over year to $3,923 million in the reported quarter due to lower light vehicle production in North America, the GM strike, unfavorable foreign-currency translation impact, and net customer-price concessions. The figure, however, outpaced the Zacks Consensus Estimate of $3,854 million. Adjusted EBIT declined to $289 million from the prior-year quarter’s $356 million, reflecting lower scrap steel and aluminum recoveries as well as higher warranty and launch costs.

The Power & Vision segmental revenues fell to $2,725 million from the prior-year figure of $2,987 million, largely due to the divestiture of the FP&C business, negative foreign-currency translation impact, lower light vehicle production in North America, the GM strike and net customer-price concessions. However, the segment’s revenues surpassed the Zacks Consensus Estimate of $2,560 million. Adjusted EBIT declined to $163 million from the $254 million recorded in fourth-quarter 2018. This downside resulted mainly from elevated engineering costs in the company’s ADAS business and higher net warranty costs.

Revenues in the Seating Systems segment decreased to $1,426 million in the October-December quarter from the prior year’s $1,435 million, due to bleak light vehicle production in North America, the GM strike, unfavorable foreign-currency translation impact, and net customer-price concessions. Yet, the reported figure exceeded the Zacks Consensus Estimate of $1,392 million. Adjusted EBIT declined to $79 million from the $110 million recorded in the prior year. This downside largely resulted from higher commodity, warranty and launch costs.

The Complete Vehicles segment revenues were down 13% to $1,461 billion, year on year, primarily due to lower volumes of the Jaguar I-Pace and BMW 5-Series and negative foreign-currency translation impact. The revenue figure also missed the Zacks Consensus Estimate of $1,469 million. Adjusted EBIT grew to $44 million from the $24 million witnessed in fourth-quarter 2018 on higher sales, and lower launch and operational improvements.

Financials

Magna had $1,276 million of cash and cash equivalents as of Dec 31, 2019, compared with $684 million as of Dec 31, 2018. It had long-term debt of $3,062 million as of Dec 31, 2019, reflecting a decline from $3,084 million recorded as of Dec 31, 2018. The long-term debt-to-capital ratio stands at 22.63%, as of Dec 31, 2019.

At the end of fourth-quarter 2019, the company’s cash flow from operations was $1,696 million, in comparison with $1,598 million at the end of fourth-quarter 2018.

Share Buyback & Dividend

During the December-end quarter, the company repurchased 4.7 million shares of common stock for $254 million.

Magna’s board of directors announced a dividend of 40 cents per share for the final quarter of 2019, payable on Mar 20, to shareholders of record as of Mar 6, 2020.

Guidance

For 2020, the company projects consolidated revenues of $38-$40 billion. Net income is expected to lie between $1.8 billion and $2 billion.

Magna anticipates adjusted EBIT margin of 6.7-7%, while capital spending is projected at $1.7 billion.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the Auto-Tires-Trucks sector include SPX Corporation SPXC and Fox Factory Holding Corp. FOXF, both carrying a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

SPX has an expected earnings growth rate of 6.52% for 2020. The stock has rallied 32.4% in the past year.

Fox Factory has an estimated earnings growth rate of 9.67% for the ongoing year. The company’s shares have appreciated 18.2% in a year’s time.

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