Magna (MGA) Beats Q3 Earnings Estimates, Lowers Guidance

Magna International Inc. (NYSE:MGA) delivered third-quarter 2018 adjusted earnings per share of $1.56, beating the Zacks Consensus Estimate of $1.49. Further, the bottom line came in higher than the year-ago figure of $1.39.

Revenues increased 9% year over year to $9.6 billion. However, the top line missed the Zacks Consensus Estimate of $9.8 billion. The quarter witnessed light vehicle production rise 4% in North America while remaining unchanged in Europe.

Moreover, adjusted EBIT declined to 699 million from the year-ago figure of $705 million.

Segment Performances

Revenues at the Body Exteriors & Structures segment was $4.2 billion in the reported quarter compared with $4 billion recorded in third-quarter 2017. Moreover, adjusted EBIT rose 5.2% year over year to $322 million.

Revenues at the Power & Vision segment totaled $2.9 billion in comparison with $2.8 billion recorded in the prior-year quarter. Adjusted EBIT declined 3.4% year over year to $258 million.

Revenues at the Seating Systems segment totaled $1.22 billion compared, almost flat year over year. Adjusted EBIT declined 27.4% year over year to $69 million.

Revenues from the Complete Vehicles segment increased to $1.39 billion in the quarter under review from $938 million in third-quarter 2017. Adjusted EBIT rose 41.2% year over year to $24 million.

Financials

Magna had $884 million of cash and cash equivalents as of Sep 30, 2018, compared with $726 million as of Dec 31, 2017. The company had long-term debt of $3.1 billion as of Sep 30, 2018, compared with $3.2 billion recorded on Dec 31, 2017.

At the end of third-quarter 2018, Magna’s cash flow from operations was $1.08 billion in comparison with $882 million recorded in the third quarter of the prior year.

Capital Deployment

The company’s board of directors has announced a quarterly dividend of 33 cents per share for the third quarter. This dividend will be paid on Dec 7, 2018, to shareholders of record as of Nov 23, 2018.

During the reported quarter, Magna repurchased 9.2 million shares for $520 million.

2018 Outlook

Magna lowered 2018 outlook to take into account lower light vehicle production, lower equity earnings in European transmission joint venture and higher costs in Body Exteriors & Structures segment. For 2018, the company anticipates light-vehicle production in North America of around 17 million units, marking a decline from the previous anticipation of 17.2 million. For Europe, it is expected to be 22.5 million units, down the prior guidance of 22.6 million units.

Moreover, Magna expects total sales of $40.3-$41.4 billion compared with the prior expectation of $40.3-$42.5 billion. The anticipation for total sales includes projected sales for Body Exteriors & Structures, Power & Vision, Seating Systems and Complete Vehicle, each in the band of $17.3-$17.7 billion, $12.3-$12.6 billion, $5.4-$5.6 billion and $5.9-$6.1 billion, respectively.

Zacks Rank & Stocks to Consider

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

A few better-ranked stocks in the auto space are Allison Transmission Holdings, Inc. (NYSE:ALSN) , Advance Auto Parts, Inc. (NYSE:AAP) and AutoZone, Inc. (NYSE:AZO) . While Allison Transmission Holdings sports a Zacks Rank #1 (Strong Buy), both Advance Auto Parts and AutoZone carry 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%. Over the past six months, shares of the company have surged 11.4%.

Advance Auto Parts has an expected long-term growth rate of 12.3%. Over the past six months, shares of the company have risen 47.6%.

AutoZone has an expected long-term growth rate of 12.2%. Over the past six months, shares of the company have risen 22%.

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