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Magna International Inc. (MGA - Analyst Report) reported earnings per share of $1.49 in the fourth quarter of 2012, up 12.9% from $1.32 in the year-ago quarter and outpaced the Zacks Consensus Estimate of $1.14. Net income increased 12.5% to $351.0 million from $312.0 million in the year-ago quarter.

Revenues went up 10.8% to $8.03 billion in the reported quarter, exceeding the Zacks Consensus Estimate of $7.75 billion. The increase in revenues was driven by improvement in North American and Rest of World (ROW) production sales and higher tooling, engineering and other sales together with improved complete vehicle assembly sales.

Vehicle production rose 12% to 3.8 million units in North America. However, production declined 8% to 3.1 million units in Western Europe. Operating income increased 17.2% to $341.0 million in the quarter from $291.0 million in the year-ago quarter.

Segment Details

Revenues from External Production Sales (comprising North America, Europe and ROW units) went up 9.9% to $6.6 billion in the reported quarter. Revenues from North America increased 12% to $3.9 billion, driven by higher production volumes of the existing programs and new program launches.

Revenues from Europe crept up 1.9% to $2.2 billion in the period. The year-over-year improvement was attributable to the launch of new programs and completion of acquisitions, partially offset by a decrease in production volume and weakening of the euro. Revenues from ROW augmented 35% to $521.0 million, due to the launch of new programs in Brazil and China as well as the completion of acquisitions.

Revenues from the Complete Vehicle Assembly segment went up 11.5% to $697.0 million in the quarter with a 5.3% rise in assembly volumes to 31,450 units. Revenues from Tooling, Engineering & Other expanded 19.1% to $728.0 million for the fourth quarter of 2012.

Financial

Magna International had $1.5 billion in cash and cash equivalents as of Dec 31, 2012, compared with $1.3 billion as of Dec 31, 2011. The company had long-term debt of $361.0 million as of Dec 31, 2012 compared with $197.0 million as of Dec 31, 2011. Long-term debt to capitalization ratio rose to 3.7% as of Dec 31, 2012 from 2.4% as of Dec 31, 2011.

In full year 2012, the company’s cash flow from operations was $2.2 billion compared with $1.2 billion during 2011. Capital expenditures amounted to $1.27 billion in the period compared with $1.24 billion in 2011.

Fiscal 2012

Magna reported 2012 earnings per share of $6.09; up 45% from $4.20 a year ago. Profits improved 40.8% to $1.4 billion from $1.0 billion a year ago.

Revenues increased 7.3% to $30.8 billion from $28.7 billion in 2011. The year-over-year improvement in sales was driven by higher production sales in North America, Europe, and ROW together with higher tooling, engineering and other sales. Vehicle production increased 18% to 15.5 million units in North America but dropped 7% to 12.7 million units in Western Europe

Dividend

The board of directors of the company declared a 16% hike in the quarterly dividend to 32 cents per share. The dividend is payable on Mar 27, 2013 to shareholders of record as of Mar 13, 2013. This improvement in dividend reflects strong performance of the company.

Outlook

For full year 2013, Magna expects revenues in the External Production segment between $27 billion and $28 billion. Complete Vehicle Assembly sales are projected in the range of $2.6 billion to $2.9 billion.

Total revenue of the company is expected between $32 billion and $33.4 billion for the year. Operating margin is expected to be in the mid-5% range with a tax rate of 24.5% for the year. Capital expenditures for the year are expected to be $1.4 billion.

Our Take

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, besides engineering and assembling complete vehicles, primarily for sale to original equipment manufacturers (OEMs) of cars and light trucks. The company currently retains a Zacks Rank #2 (Buy).

Few stocks that are performing well in the industry where Magna operates include Oshkosh Corporation (OSK - Snapshot Report), Strattec Security (STRT - Snapshot Report) and Gentherm Incorporated (THRM - Snapshot Report). Oshkosh and Strattec Security are Zacks Rank #1 (Strong Buy) stocks while Gentherm carries a Zacks Rank #2 (Buy).
 

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