We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
How Does Magna Plan to Use Its Strong Free Cash Flow in 2026?
Read MoreHide Full Article
Key Takeaways
Magna projects 2026 free cash flow of $1.6B-$1.8B, exceeding 90% of adjusted net income.
MGA plans to use excess cash after dividends for share repurchases and debt reduction.
Magna targets leverage below 1.5x, backed by disciplined spending and strong cash flow conversion.
Magna International Inc. (MGA - Free Report) generated $3.6 billion in operating cash flow and $1.9 billion in free cash flow in 2025. This performance reflects a disciplined approach to capital spending, with capital expenditures improving to 3.1% of sales, alongside continued enhancements in fixed cost structure and engineering optimization. As a result, the company ended the year with an agency-adjusted debt-to-EBITDA ratio of 1.58x, which surpassed its expectation of being below 1.7x.
Looking ahead, the company expects 2026 to be another year of strong free cash flow, projected in the range of $1.6 billion to $1.8 billion or more than 90% of adjusted net income. Magna expects this level of free cash flow to be sustainable and is targeting a 100% conversion of net income into free cash flow. It expects this consistency to support its capital allocation strategy not only in 2026 but also in the years ahead.
For 2026, after accounting for dividends, it anticipates having substantial cash available for share repurchases while continuing to reduce leverage and maintain financial flexibility to support business operations. The company expects its leverage ratio to fall below 1.5x in 2026. MGA stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Expected Free Cash Flow Performance of MGA’s Competitors
Adient plc (ADNT - Free Report) expects free cash flow of $125 million in fiscal 2026, down from $204 million in fiscal 2025 as a result of three main factors. First, cash flow in the prior year benefited from a favorable $30 million pull-ahead that will not repeat. Second, cash taxes in fiscal 2026 will be higher, tied to a one-time non-recurring tax settlement in a non-U.S. jurisdiction. Third, capex is expected to remain high amid customer launch schedules and higher investment in innovation and automation.
PHINIA Inc. (PHIN - Free Report) demonstrates consistent cash generation in 2025 with adjusted free cash flow of $212 million. For 2026, it expects adjusted free cash flow in the range of $200-$400 million, roughly flat to up with 2025 levels. Importantly, PHINIA is actively returning capital to shareholders, distributing $242 million in 2025 through buybacks and dividends. In January, it further reinforced its shareholder-friendly stance with an 11% dividend hike and a $150 million share buyback boost.
Magna’s Price Performance, Valuation and Estimates
Magna has outperformed the Zacks Automotive-Original Equipment industry in the past six months. MGA shares have gained 29.9% against the industry’s decline of 8%.
Image Source: Zacks Investment Research
From a valuation perspective, MGA appears undervalued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 0.37, lower than the industry’s 2.1.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for MGA’s 2026 and 2027 EPS has moved up 77 cents and 95 cents, respectively, in the past 60 days.
Image Source: Zacks Investment Research
Zacks' 7 Best Strong Buy Stocks (New Research Report)
Valued at $99, click below to receive our just-released report
predicting the 7 stocks that will soar highest in the coming month.
View the Zacks #1 Rank List
Image: Bigstock
How Does Magna Plan to Use Its Strong Free Cash Flow in 2026?
Key Takeaways
Magna International Inc. (MGA - Free Report) generated $3.6 billion in operating cash flow and $1.9 billion in free cash flow in 2025. This performance reflects a disciplined approach to capital spending, with capital expenditures improving to 3.1% of sales, alongside continued enhancements in fixed cost structure and engineering optimization. As a result, the company ended the year with an agency-adjusted debt-to-EBITDA ratio of 1.58x, which surpassed its expectation of being below 1.7x.
Looking ahead, the company expects 2026 to be another year of strong free cash flow, projected in the range of $1.6 billion to $1.8 billion or more than 90% of adjusted net income. Magna expects this level of free cash flow to be sustainable and is targeting a 100% conversion of net income into free cash flow. It expects this consistency to support its capital allocation strategy not only in 2026 but also in the years ahead.
For 2026, after accounting for dividends, it anticipates having substantial cash available for share repurchases while continuing to reduce leverage and maintain financial flexibility to support business operations. The company expects its leverage ratio to fall below 1.5x in 2026. MGA stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Expected Free Cash Flow Performance of MGA’s Competitors
Adient plc (ADNT - Free Report) expects free cash flow of $125 million in fiscal 2026, down from $204 million in fiscal 2025 as a result of three main factors. First, cash flow in the prior year benefited from a favorable $30 million pull-ahead that will not repeat. Second, cash taxes in fiscal 2026 will be higher, tied to a one-time non-recurring tax settlement in a non-U.S. jurisdiction. Third, capex is expected to remain high amid customer launch schedules and higher investment in innovation and automation.
PHINIA Inc. (PHIN - Free Report) demonstrates consistent cash generation in 2025 with adjusted free cash flow of $212 million. For 2026, it expects adjusted free cash flow in the range of $200-$400 million, roughly flat to up with 2025 levels. Importantly, PHINIA is actively returning capital to shareholders, distributing $242 million in 2025 through buybacks and dividends. In January, it further reinforced its shareholder-friendly stance with an 11% dividend hike and a $150 million share buyback boost.
Magna’s Price Performance, Valuation and Estimates
Magna has outperformed the Zacks Automotive-Original Equipment industry in the past six months. MGA shares have gained 29.9% against the industry’s decline of 8%.
Image Source: Zacks Investment Research
From a valuation perspective, MGA appears undervalued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 0.37, lower than the industry’s 2.1.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for MGA’s 2026 and 2027 EPS has moved up 77 cents and 95 cents, respectively, in the past 60 days.
Image Source: Zacks Investment Research