A month has gone by since the last earnings report for Magna (MGA - Free Report) . Shares have lost about 2.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Magna due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts. <p style="text-align: justify;"><strong>Magna Misses Q2 Earnings Estimates, Lowers Guidance</strong><br /><br />Magna reported adjusted earnings per share of $1.67, missing the Zacks Consensus Estimate of $1.71. However, earnings came in higher than the year-ago figure of $1.45.<br /><br />Revenues increased 12.5% year over year to $10.3 billion. However, the top line missed the Zacks Consensus Estimate of $10.6 billion. The year-over-year rise in sales is primarily owing to growth across all of its operating segments.<br /><br />Moreover, the company reported a 6% increase in adjusted EBIT to $803 million from the year-ago figure of $785 million.<br /><br /><strong>Segment Performances</strong><br /><br />Revenues at the Body Exteriors & Structures segment was $4.6 billion in the reported quarter compared with $4.1 billion recorded in second-quarter 2017. Moreover, adjusted EBIT rose 14.2% year over year to $385 million.<br /><br />Revenues at the Power & Vision segment totaled $3.2 billion in comparison with $2.9 billion recorded in the prior-year quarter. Adjusted EBIT gained 12.4% year over year to $299 million.<br /><br />Revenues at the Seating Systems segment totaled $1.42 billion compared with $1.37 billion recorded in the prior-year quarter. Adjusted EBIT declined 0.9% year over year to $116 million.<br /><br />Revenues from the Complete Vehicles segment increased to $1.28 billion in the quarter under review from $869 million in second-quarter 2017. Adjusted EBIT declined 93.3% year over year to $2 million.<br /><br /><strong>Financials</strong><br /><br />Magna International had $626 million of cash and cash equivalents as of Jun 30, 2018, compared with $726 million as of Dec 31, 2017. The company had long-term debt of $3.1 billion as of Jun 30, 2018, compared with $3.2 billion recorded on Dec 31, 2017.<br /><br />At the end of second-quarter 2018, Magna International’s cash flow from operations was $467 million in comparison with $558 million recorded in the second quarter of the prior year.<br /><br /><strong>Capital Deployment</strong><br /><br />The company’s board of directors has announced a quarterly dividend of 33 cents per share for the second quarter. This dividend will be paid on Sep 14, 2018, to shareholders of record as of Aug 31, 2018.<br /><br />During the reported quarter, Magna International repurchased 11.7 million shares for $729 million.<br /><br /><strong>2018 Outlook</strong><br /><br />Magna lowers 2018 outlook due to strengthening U.S. dollar, developments in transmission joint-venture operations and effects of tariff. For 2018, the company expects light-vehicle production in North America of around 17.2 million units, marking a decline from the previous anticipation of 17.3 million. For Europe, it is expected to be 22.6 million units, unchanged from the prior guidance.<br /><br />Moreover, Magna International expects total sales of $40.3-$42.5 billion compared with the prior expectation of $40.9-$43.1 billion. The anticipation for total sales includes projected sales for Body Exteriors & Structures, Power & Vision, Seating Systems and Complete Vehicle, each in the band of $17.1-$17.9 billion, $12.2-$12.8 billion, $5.5-$5.9 billion and $6.1-$6.5 billion, respectively.</p>
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -6.17% due to these changes.
At this time, Magna has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Magna has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.