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Magna (MGA) Gains on Innovation Amid Lower Production Outlook

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On Dec 31, we issued an updated research report on Magna International, Inc. (MGA - Free Report) .

This Aurora, Canada-based manufacturer and supplier of automotive components is focusing on innovation and technology developments for future growth. It believes that with rising prominence of mobility and autonomous vehicles, the demand for advanced automotive components will also witness an upward trend. With an aim to develop technically-enhanced products and cater to the rising demand for automotive components, the company is acquiring companies and launching new products.

Recently, the company introduced an advanced seating platform that offers a flexible vehicle interior for passengers. Such kind of product launches aided its Seating Systems segment to generate $1.22 billion of revenues in third-quarter 2018.

Magna International Inc. Price and Consensus


Apart from launching products, the company announced the acquisition of VIZA Geca SL that offers seat-structure expertise in December. The buyout will aid Magna’s seating business to focus on developing future-oriented vehicle seating solutions. Earlier in October, it announced that it signed an agreement to acquire Haptronik GmbH that will help it develop advanced technologies for the automotive market.

The company also holds a strong position as a leading vehicle contract manufacturer, owing to its experienced fleet vehicle engineering and production. In 2018, its assembly facility in Graz, Austria, received its fifth vehicle model assembling contract to manufacture BMW’s Z4 model. In third-quarter 2018, the company’s Complete Vehicle unit’s sales rose 48% year over year to $1.4 billion on the back of Jaguar E-PACE and I-PACE program launches.

During the last reported quarter, Magna’s earnings surpassed the Zacks Consensus Estimate while the top line missed the same. High costs related to launches have impacted the company’s financials.

The company, in November, lowered its 2018 outlook. For the fourth quarter, it expects higher costs in Body Exteriors & Structures segment, lower equity earnings in European transmission joint venture, and lower-than-expected light-vehicle production.

For 2018, the company anticipates light-vehicle production in North America of around 17 million units, a decline from the previous expectations of 17.2 million. For Europe, it is expected to be 22.5 million units, down the prior guidance of 22.6 million units. Additionally, Magna reduced sales guidance for 2018 to $40.3-$41.4 billion from $40.3-$42.5 billion expected earlier.

Price Performance

Over the past three months, shares of the company have lost 15.5% compared with the industry’s decline of 25.9%.


Zacks Rank & Stocks to Consider

Magna International currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the auto space are Fox Factory Holding Corporation (FOXF - Free Report) , CarGurus, Inc. (CARG - Free Report) and Cooper Tire & Rubber Company (CTB - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Fox Factory has an expected long-term growth rate of 5%. Share price of the company has increased 20.1% in the past six months.

CarGurus has an expected long-term growth rate of 5%. Shares of the company have gained 13% in the past year.

Cooper Tire has an expected long-term growth rate of 4%. Over the past six months, shares of the company have gained 22.2%.

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