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Magna International (MGA) Tops Q3 Earnings and Revenues

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Magna International Inc. (MGA - Free Report) reported record third-quarter 2016 earnings per share of $1.29 that surpassed the Zacks Consensus Estimate of $1.20. Earnings per share also improved 14.2% from $1.13 recorded in the third quarter of 2015.

Revenues increased 15.5% year over year to a third-quarter record of $8.85 billion and steered past the Zacks Consensus Estimate of $8.64 billion.

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.

Shares of Magna International fell 1.9% to $39.22 on Nov 3.

 

Segment Details

Revenues from the External Productionsegment (comprising North America, Europe, Asia, and Rest of World or ROW units) rose 16% year over year to $8.85 billion in the reported quarter.

Sales in North America climbed 13% to a third-quarter record of $4.84 billion, driven by product launches and the acquisition of Getrag that contributed $142 million to sales. Revenues from Europe surged 29% year over year to a third-quarter record of $2.18 billion, backed by new product launches and benefits from acquisitions. Revenues from Asia jumped 58% to a third-quarter record of $548 million. The rise was aided by the launch of new programs, primarily in China along with benefits from acquisitions. Revenues from ROW rose 7% to $119 million due to the launch of new programs, primarily in Brazil and higher net customer prices.

Revenues at the Complete Vehicle Assembly segment totaled $503 million, down 4% from $522 million a year ago. Moreover, assembly volumes declined 19% to 18,682 units.

Revenues from the Tooling, Engineering & Other segment increased 7% to $658 million in the quarter under review.

Financials

Magna International had $364 million of cash and cash equivalents as of Sep 30, 2016, compared with $2.9 billion as of Dec 31, 2015. The company had long-term debt of $2.7 billion as of Sep 30, 2016, compared with $2.6 billion as of Dec 31, 2015.

In the first nine months of 2016, Magna International’s cash flow from operations increased to $1.67 billion from $1.32 billion a year ago.

Capital Deployment

On Nov 3, 2016, the board of directors of the company declared a quarterly dividend of 25 cents per share. This dividend is payable on Dec 9, to shareholders on record as of Nov 25, 2016.

In the first nine months of 2016, Magna International repurchased 19.8 million shares for $799 million. The repurchase program expires later this month. The company’s board of directors has approved a repurchase program to buy back 38 million shares, representing roughly 10% of the outstanding common shares, which is scheduled to begin on Nov 14, 2016 and terminate in a year.

Magna International maintains a revolving credit facility of $2.75 billion due on Jun 22, 2021. In the third quarter, the company issued U.S. commercial paper worth $265 million.

Outlook

For 2016, Magna International projects revenues from the External Production segment in the band of $30.7–$31.6 billion, compared to $30.6–$31.9 billion guided earlier. Meanwhile, Complete Vehicle Assembly sales are projected in the range of $2–$2.2 billion, compared to the previous forecast of $2.0–$2.3 billion.

Thus, for 2016, the company expects total revenue between $35.8−$37 billion, compared to the earlier expectation of $35.5−$37.2 billion. Tax rate continues to be projected at 26%, while capital expenditures are anticipated to be $1.8−$1.9 billion, compared to the previous expectation of $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.

MAGNA INTL CL A Price, Consensus and EPS Surprise

 

MAGNA INTL CL A Price, Consensus and EPS Surprise | MAGNA INTL CL A Quote

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

Stocks to Consider

Some better-ranked automobile stocks include Standard Motor Products Inc. (SMP - Free Report) , Visteon Corporation (VC - Free Report) and Gentex Corp. (GNTX - Free Report) , each carrying a Zacks Rank #2 (Buy).

Standard Motor, with a long-term expected growth rate of 15%, sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Visteon, a Zacks Rank #2 stock, has a long-term growth rate of 23.60%.

Gentex, with a Zacks Rank #2, has a long-term growth rate of 11.17%.

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