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Magna (MGA) Rides on Innovations & New Launches Amid Tariffs

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On Nov 27, we issued an updated research report on Magna International Inc. (MGA - Free Report) .

In third-quarter 2018, Magna’s earnings surpassed the Zacks Consensus Estimate and were higher than the prior-year quarter figure. During the reported quarter, revenues missed the Zacks Consensus Estimate but improved year over year. For 2018, Magna lowered its outlook after taking into account lower light-vehicle production, lower equity earnings in the European transmission joint venture, and higher costs in Body Exteriors & Structures segment.

However, the company is focusing on innovation and new program launches for growth. It is focusing on growth of its light-weight thermoplastic liftgate modules as demand for crossovers and sport utility vehicles is rising. Further, Magna is expanding business through collaborations and acquisitions.

New or higher tariffs by the United States on steel, aluminum and other imports from certain countries, along with retaliatory measures taken by the affected countries, have raised input costs and adversely hit the company’s profitability. For 2018, Magna expects light-vehicle production in North America to be around 17 million units, marking a decline from the previous anticipation of 17.2 million. For Europe, it is expected to be 22.5 million units, down from the prior guidance of 22.6 million units.

In the past year, Magna outperformed the industry it belongs to. The company’s shares have decreased 12.6% over this period, whereas the industry declined 25.2%.

Zacks Rank & Key Picks

Currently, Magna has a Zacks Rank #3 (Hold).

A few better-ranked stocks in the auto space are Allison Transmission Holdings, Inc. (ALSN - Free Report) , Fox Factory Holding Corp. (FOXF - Free Report) and AutoZone, Inc. (AZO - Free Report) . While Allison Transmission and Fox Factory currently sport a Zacks Rank #1 (Strong Buy), AutoZone carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Allison Transmission has an expected long-term growth rate of 10%. Over the past six months, shares of the company have increased 11.3%.

Fox Factory has an expected long-term growth rate of 17.9%. Over the past six months, shares of the company have risen 61.8%.

AutoZone has an expected long-term growth rate of 12.2%. Over the past six months, shares of the company have risen 32.7 %.

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