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Magna (MGA) Up 15% Since Solid Q4 Earnings & Robust '21 View

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Magna International’s (MGA - Free Report) shares have surged 15% since its impressive fourth-quarter 2020 results on Feb 19. Not only did the auto equipment supplier post a comprehensive beat, it also recorded higher year-over-year earnings and revenues. Investors were also encouraged by dividend hike and solid 2021 guidance provided by the company.

Magna reported fourth-quarter 2020 adjusted earnings of $2.83 per share, skyrocketing nearly 101% from the year-ago period. The reported figure also surpassed the Zacks Consensus Estimate of $1.98 per share. Higher-than-expected contribution across all four segments of the company resulted in this outperformance. For the reported quarter, net sales rose 12.5% from the prior-year period to $10,568 million. The top line also outpaced the Zacks Consensus Estimate of $9,927 million.

Segmental Performances

The Body Exteriors & Structures segment’s revenues for the reported quarter came in at $4,393 million, up 12% from $3,923 million in the year-ago period. The sales figure compared favorably with the year-ago period due to the launch of new models, forex gains and higher global light vehicle production. Consequently, the segment reported adjusted EBIT of $543 million, reflecting an 88% year-over-year jump on cost savings, productivity improvements and higher sales. The metric also handily beat the consensus mark of $364 million.

For the December-end quarter, the Power & Vision segment revenues climbed to $3,179 million from the prior-year figure of $2,725 million. The launch of programs during or subsequent to fourth-quarter 2019 and net strengthening of foreign currencies against the U.S. dollar boosted the unit’s sales. Further, cost-cut efforts and high sales led to a whopping 120% year-over-year surge in EBIT. Segmental EBIT of $359 million also surpassed the consensus mark of $223 million. 

Revenues in the Seating Systems segment slipped 3% year over year to $1,390 million for the reported quarter due to lower production of certain key products and unfavorable foreign currency translations. Pretax profit, however, increased 8% year over year to $85 million, thanks to productivity and efficiency improvements. The metric also came in higher than the consensus mark of $69 million. 

For the October-December period, the Complete Vehicles segment’s revenues grew 20% year over year to $1,759 million amid higher volumes on the Jaguar I-Pace, BMW 5 Series, and Mercedes Benz G-Class and forex gains. Adjusted EBIT soared 150% year over year to $110 million on the back of a favorable program mix and cost-containment efforts. The metric also outpaced the consensus mark of $91 million.

Financials & Dividend

Magna — whose peers include American Axle & Manufacturing (AXL - Free Report) , Adient (ADNT - Free Report) and Meritor (MTOR - Free Report) — had $3,268 million cash and cash equivalents as of Dec 31, 2020 compared with $1,276 million in the corresponding period of 2019. It had a long-term debt of $3,973 million as of 2020-end, reflecting a rise from the $3,062 million recorded on Dec 31, 2019. For the reported quarter, cash provided from operating activities totaled $2,259 million compared with $1,696 million in the year-ago period.

During the quarter under review, Magna returned $582 million to shareholders via dividends ($115 million) and stock buybacks ($467 million). Encouragingly, its board of directors announced a dividend of 43 cents per share for fourth-quarter 2020, representing an 8% hike.  The dividend will be payable on Mar 19, 2021 to shareholders of record on Mar 5, 2021.

2021 Guidance

Magna expects full-year revenues in the band of $40-$41.6 billion, implying a rise from $32.6 million recorded in 2020. Adjusted EBIT margin is anticipated in the range of 7.1-7.5%, indicating growth from 5.1% attained in 2020. The Zacks Rank #1 (Strong Buy) company envisions capital spending of $1.6 billion for 2021. You can see the complete list of today’s Zacks #1 Rank stocks here.

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