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Magna (MGA) Misses Q2 Earnings Estimates, Lowers Guidance

Zacks Equity Research
Updated

Shares of Magna International Inc. MGA have declined roughly 8.2% in a day’s trading, following its second-quarter 2018 earnings release. The company reported adjusted earnings per share of $1.67, missing the Zacks Consensus Estimate of $1.71. However, earnings came in higher than the year-ago figure of $1.45.

Revenues increased 12.5% year over year to $10.3 billion. However, the top line missed the Zacks Consensus Estimate of $10.6 billion. The year-over-year rise in sales is primarily owing to growth across all of its operating segments.

Moreover, the company reported a 6% increase in adjusted EBIT to $803 million from the year-ago figure of $785 million.

Magna International Inc. Price, Consensus and EPS Surprise

 

Magna International Inc. Price, Consensus and EPS Surprise | Magna International Inc. Quote

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Segment Performances

Revenues at the Body Exteriors & Structures segment was $4.6 billion in the reported quarter compared with $4.1 billion recorded in second-quarter 2017. Moreover, adjusted EBIT rose 14.2% year over year to $385 million.

Revenues at the Power & Vision segment totaled $3.2 billion in comparison with $2.9 billion recorded in the prior-year quarter. Adjusted EBIT gained 12.4% year over year to $299 million.

Revenues at the Seating Systems segment totaled $1.42 billion compared with $1.37 billion recorded in the prior-year quarter. Adjusted EBIT declined 0.9% year over year to $116 million.

Revenues from the Complete Vehicles segment increased to $1.28 billion in the quarter under review from $869 million in second-quarter 2017. Adjusted EBIT declined 93.3% year over year to $2 million.

Financials

Magna International had $626 million of cash and cash equivalents as of Jun 30, 2018, compared with $726 million as of Dec 31, 2017. The company had long-term debt of $3.1 billion as of Jun 30, 2018, compared with $3.2 billion recorded on Dec 31, 2017.

At the end of second-quarter 2018, Magna International’s cash flow from operations was $467 million in comparison with $558 million recorded in the second 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 second quarter. This dividend will be paid on Sep 14, 2018, to shareholders of record as of Aug 31, 2018.

During the reported quarter, Magna International repurchased 11.7 million shares for $729 million.

2018 Outlook

Magna lowers 2018 outlook due to strengthening U.S. dollar, developments in transmission joint-venture operations and effects of tariff. For 2018, the company expects light-vehicle production in North America of around 17.2 million units, marking a decline from the previous anticipation of 17.3 million. For Europe, it is expected to be 22.6 million units, unchanged from the prior guidance.

Moreover, Magna International expects total sales of $40.3-$42.5 billion compared with the prior expectation of $40.9-$43.1 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 $17.1-$17.9 billion, $12.2-$12.8 billion, $5.5-$5.9 billion and $6.1-$6.5 billion, respectively.

Zacks Rank & Stocks to Consider

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

A few better-ranked stocks in the auto space are PACCAR Inc. PCAR, Fox Factory Holding Corp. FOXF and AB Volvo VLVLY. While both PACCAR and Fox Factory Holding sport a Zacks Rank #1 (Strong Buy), Volvo carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PACCAR has an expected long-term growth rate of 10.8%. Over the past month, shares of the company have moved up 3%.

Fox Factory has an expected long-term growth rate of 16.8%. Shares of the company have risen 70.8% over the past year.

AB Volvo has an expected long-term growth rate of 15%. Over the past month, shares of the company have gained 1.6%.

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