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Magna International (MGA) Beats on Q2 Earnings & Revenues

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Magna International Inc. (MGA - Free Report) reported earnings per share of $1.41 for the second quarter of 2016 that surpassed the Zacks Consensus Estimate of $1.34. Earnings per share also improved 9.3% from $1.29 recorded in the second quarter of 2015.
 

 

 

Revenues increased 16% year over year to $9.4 billion in the reported quarter and steered past the Zacks Consensus Estimate of $9.3 billion. Excluding the impact of foreign currency translation, sales jumped 18% in the quarter.

Vehicle production rose 2% to 4.6 million units in North America and 6% to 5.8 million units in Europe. Income from operations before income taxes went up 5.6% to $767 million in the reported quarter from $726 million a year ago.

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Segment Details
 
Revenues from the External Production segment (comprising North America, Europe, Asia, and Rest of World or ROW units) rose 15.3% year over year to $7.99 billion in the reported quarter.

Sales in North America climbed 7% to $4.9 billion, driven by product launches and higher production levels. Revenues from Europe surged 36% year over year to $2.5 billion in the reported quarter, backed by new product launches and benefits from acquisitions. Revenues from Asia jumped 28% to $499 million in the quarter. The rise was aided by the launch of new products and benefits from acquisitions. Revenues from ROW plunged 14% to $107 million due to lower production volumes and a decline in U.S dollar production sales.

Revenues at the Complete Vehicle Assembly segment totaled $652 million, up 7% from $607 million a year ago. However, assembly volumes declined 9% to 25,715 units.

Revenues from the Tooling, Engineering & Other segment surged 33% to $797 million in the quarter under review.

Financials

Magna International had $597 million of cash and cash equivalents as of Jun 30, 2016, compared with $2.9 billion as of Dec 31, 2015. The company had long-term debt of $3.3 billion as of Jun 30, 2016, compared with $2.6 billion as of Dec 31, 2015.

In the first half of 2016, Magna International’s cash flow from operations increased to $1.01 billion from $720 million a year ago.

Capital Deployment

On Aug 4, 2016, the board of directors of the company declared a quarterly dividend of 25 cents per share. This dividend is payable on Sep 9, to shareholders on record as of Aug 26, 2016.

In the first half of 2016, Magna International repurchased 15.1 million shares for $608 million. The company has 22.3 million remaining under its share repurchase authorization.

On May 2, 2016, Magna International increased its revolving credit facility by $500 million to $2.75 billion. The company also extended the final maturity date from Jun 22, 2020 to Jun 22, 2021.

Outlook

For 2016, Magna International projects revenues for the External Production segment in the band of $30.6–$31.9 billion, lower than $30.7–$32 billion guided earlier. Meanwhile, Complete Vehicle Assembly sales are projected in the range of $2–$2.3 billion, up from the previous forecast of $1.9–$2.2 billion.

Thus, for 2016, the company expects total revenue between $35.5 billion and $37.2 billion, in line with the earlier expectation. Tax rate is projected to be 26%, while capital expenditures are anticipated to be $1.8–$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.

The company currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked automobile stocks include The Goodyear Tire & Rubber Company (GT - Free Report) , Visteon Corporation (VC - Free Report) and Gentex Corp. (GNTX - Free Report) , each carrying a Zacks Rank #2 (Buy).

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