Magna International (MGA) Beats On Q1 Earnings, Revenues

Magna International Inc. ( (NYSE:MGA) reported first-quarter 2017 earnings per share of $1.53 that surpassed the Zacks Consensus Estimate of $1.34. Earnings also improved 25% from $1.22 recorded in the first quarter of 2016.

Revenues increased 5% year over year to $9.37 billion and outperformed the Zacks Consensus Estimate of $9.26 billion as well.

The company also reported an increase in adjusted EBIT to $831 million, from the year-ago figure of $698 million.

Vehicle production dropped 1% to 4.5 million units in North America and increased 2% to 5.76 million units in Europe.

Shares of Magna International rose 4.4% to close at $44.67 on May 11 on the better than expected results.

Segment Details

Revenues at the External Production segment (comprising North America, Europe, Asia, and Rest of World or ROW units) rose 8% year over year to $8.23 billion in the reported quarter.

Sales in North America climbed 7% to $5.09 billion, driven by product launches. Revenues from Europe rose 8% year over year to $2.46 billion, backed by new product launches and benefits from acquisitions. Revenues from Asia jumped 10% to $557 million. The rise was aided by the launch of new programs, primarily in China along with benefits from acquisitions. Revenues from ROW rose 58% to $126 million due to the launch of new programs, primarily in Brazil, and higher net customer prices.

Revenues at the Complete Vehicle Assembly segment totaled $413 million, down 31% from $596 million a year ago. Moreover, assembly volumes declined 65% to 8,200 units.

Revenues from the Tooling, Engineering & Other segment increased 6% to $726 million in the quarter under review.

Financials

Magna International had $831 million of cash and cash equivalents as of Mar 31, 2017, compared with $974 million as of Dec 31, 2016. The company had long-term debt of $2.39 billion as of Mar 31, 2017, in line with the Dec 31, 2016 figure.

In first quarter 2017, Magna International’s cash flow from operations were $870 million.

Capital Deployment

On May 11, 2017, the board of directors of the company announced a quarterly dividend of 27.5 cents for the first quarter. This dividend is payable on Jun 9, 2017, to shareholders of record as on May 26, 2017.

In the first quarter, Magna International repurchased 2.3 million shares for $100 million and paid a dividend of $105 million.

Outlook

For 2017, Magna International projects revenues from the Vehicle Production segment within the range of $30.8–$32.1 billion. Meanwhile, Complete Vehicle Assembly sales are projected in the range of $2.7–$3 billion.

Thus for 2017, the company expects total revenue within $36.6–$38.3 billion. Tax rate is projected in the range of 25–26%, while capital expenditures are anticipated at around $2 billion.

Magna International, based in Aurora, Canada, is a leading manufacturer and supplier of automotive components. The company designs, develops and manufactures automotive systems, assemblies, modules and components, apart from engineering and assembling complete vehicles, primarily for sale to original equipment manufacturers of cars and light trucks.

Price Performance

Magna International has outperformed the Zacks categorized Auto/Truck-Original Equipment Market industry over the last one month. The stock has gained 12.34% over this period while the industry has seen an 8.96% increase.

Zacks Rank & Key Picks

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

Better-ranked companies in the auto space include Ferrari N.V. (NYSE:RACE), Allison Transmission Holdings Inc. (ALSN) and Dana Incorporated (DAN). All the stocks carry a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The expected long-term growth rate for Ferrari, Allison Transmission and Dana are pegged at 14.13%, 11% and 3%, respectively.

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