On Oct 18, 2013, we upgraded Magna International Inc. (MGA - Analyst Report) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Magna International generated positive earnings surprise in the last 4 quarters with an average beat of 17.84%. Earnings per share of the company reached a record high of $1.78 in the second quarter of 2013, driven by higher net income and lower share count.
Even revenues reached a record high of $8.96 billion on higher global sales. Moreover, the current revenue guidance of $33.3–$34.7 billion, if achieved, will imply record high annual revenues for Magna International in 2013.
Following the release of second-quarter earnings, the Zacks Consensus Estimate for Magna International’s 2013 earnings per share increased 1.14% to $6.21, up 7.22% over 2012. Even the estimate for 2014 improved 1.36% to $7.48, up 20.43% over the prior year.
The rising earnings of Magna International are boosting its cash flows, which in turn facilitates regular capital deployment. As a result, the company declared a 16% hike in the quarterly dividend to 32 cents per share earlier this year.
In the long run, stricter regulation formulated by the U.S. government to curb emissions will stir up demand for auto parts and other fuel efficient components for trucks. The new emission standards will be implemented from 2014 followed by more stringent requirements in 2017.
Other Stocks to Consider
Other companies worth considering in the original auto and truck business are TRW Automotive Holdings Corp. (TRW - Analyst Report), Gentex Corp. (GNTX - Snapshot Report) and Denso Corp. (DNZOY). All these stocks carry a Zacks Rank #1 (Strong Buy).