Vehicle Assembly Unit Drives Magna, North America Sales Dip
On Mar 5, we issued an updated research report on Magna International Inc. MGA.
On Feb 22, Magna International reported adjusted earnings per share of $1.57 for fourth-quarter 2017, beating the Zacks Consensus Estimate by a cent. Quarterly sales rose 12% year over year to $10.39 billion. The top line also surpassed the Zacks Consensus Estimate of $9.96 billion. During the quarter, the company’s complete vehicle assembly sales increased appreciably, primarily due to the launch of BMW 5-Series and Jaguar E-Pace assembling in Graz, Austria.
Magna International’s contract vehicle assembly facility in Graz is attracting many business contracts. In July 2017, it received a contract to create Jaguar’s E-PACE model. Earlier in June, the company won a manufacturing contract from BMW, under which, it will manufacture new 530e plug-in hybrid model for BMW. Further, by 2018, the facility is anticipating to reach the production volume of around 200,000 vehicles per year. This has influenced Magna International to project sales from complete vehicles segment to be within $6-$6.4 billion in 2018.
Magna International Inc. Price and Consensus
Magna International Inc. Price and Consensus | Magna International Inc. Quote
Moreover, for 2018, the company’s light-vehicle production in Europe is expected to be 22.4 million units, against its prior expectation of 22.3 million. Further, it anticipates total sales to be within the range of $39.3-$41.5 billion compared with $38.95 billion recorded in 2017.
Along with the quarterly results, it also announced raising its quarterly dividend by 20% to 33 cents from 27.5 cents per share for the fourth quarter. In 2017, the company paid total $400 million in cash dividends and bought back total 26.2 million shares for $1.27 billion.
However, a decline in the company’s light vehicle production volume in North America, majorly due to the ending of certain production programs in the region, is a concern. For 2020, Magna International production volume in North America is projected to be 17.4 million units, same as 2018 expectations.
Price Performance
In the last three months, shares of Magna International have underperformed the industry it belongs to. During the period, the company’s stock has lost 5.7% in comparison with the industry’s decline of 2%.
Zacks Rank & Key Picks
Magna International carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the auto space are Allison Transmission Holdings, Inc. ALSN, Navistar International Corporation NAV and Oshkosh Corporation OSK. Both Allison Transmission and Navistar flaunt a Zacks Rank #1 (Strong Buy), while Oshkosh Corp carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Allison Transmission has an expected long-term growth rate of 10%. In the last six months, shares of the company have gained 16.8%.
Navistar has an expected long-term growth rate of 5%. Over a year, shares of the company gained 51.4%.
Oshkosh Corp has an expected long-term growth rate of 17.6%. The company’s stock has seen the Zacks Consensus Estimate for annual earnings being revised 1.3% upward over the last seven days.
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