Magna (MGA) Earnings Surpass Estimates In Q3, Decline Y/Y

Magna International Inc. (NYSE:MGA) delivered adjusted earnings per share of $1.41 in third-quarter 2019, beating the Zacks Consensus Estimate of $1.38, mainly aided by increased revenues at the Seating Systems and Complete Vehicles segment. However, the bottom line declined from the year-ago quarter’s $1.56.

The company’s revenues declined 3% year over year to $9,319 million owing to unfavorable foreign currency translation and divestitures. However, the metric surpassed the Zacks Consensus Estimate of $9,305 million.

Adjusted EBIT declined to $558 million from the year-ago figure of $699 million, thanks to the General Motors (NYSE:GM) strike and net customer price concessions.

Segmental Performances

Revenues at the Body Exteriors & Structures segment fell 5% year over year to $4 billion in the reported quarter due to lower vehicle production, the General Motors strike, unfavorable foreign currency translation, and net customer price concessions. Adjusted EBIT declined to $306 million from the prior-year quarter’s $326 million, reflecting lower scrap steel recoveries as well as higher commodity, warranty and launch costs.

Revenues at the Power & Vision segment fell to $2.7 billion from the prior-year figure of $2.9 billion, largely due to negative foreign currency translation, lower vehicle production, the GM strike and net customer price concessions. Adjusted EBIT declined to $167 million from $259 million in third-quarter 2018, mainly because of higher engineering and other costs in the company’s ADAS business, and lower equity income.

Revenues at the Seating Systems segment rose to $1,266 million in the quarter under review from the prior-year $1,219 million owing to programs launches and the acquisition of VIZA. Adjusted EBIT declined to $56 million from $69 million recorded in the prior year. The decline was largely due to lower sales at a number of facilities, higher commodity costs, launch costs and operational inefficiencies at the South Carolina facility.

Revenues at the Complete Vehicles segment rose 9% year over year to $1.5 billion, primarily driven by the launches of BMW Z4 and Toyota Supra programs as well as continued ramp-up of the Mercedes G-Class and Jaguar I-PACE. Adjusted EBIT grew to $29 million from $24 million in third-quarter 2018 on higher sales, and lower launch and other costs.

Financials

Magna had $769 million of cash and cash equivalents as of Sep 30, 2019, compared with $684 million as of Dec 31, 2018. It had long-term debt of $3,021 million as of Sep 30, 2019, reflecting a decline from $3,084 million recorded as of Dec 31, 2018. The debt-to-capital ratio stands at 21.19%, as of Sep 30, 2019.

At the end of third-quarter 2019, the company’s cash flow from operations was $750 million, in comparison with $1.08 billion at the end of third-quarter 2018.

Share Buyback & Dividend

During the September-end quarter, the company repurchased 6.8 million shares of common stock for $342 million.

Magna’s board of directors announced a dividend of 36.5 cents per share for the third quarter of 2019, reaching the total to $109 million.

Guidance

For 2019, the company projects consolidated revenues in the range of $38.7-$39.8 billion, down from previously mentioned $38.9-$41.1 billion.

The company anticipates adjusted EBIT margin of 6.3-6.5%, reflecting a drop from the prior guidance of 6.6-6.9%.

Magna’s free cash flow expectations remain at the range of $1.9-$2.1 billion despite the lowering of the consolidated sales and margins projections for 2019.

Zacks Rank & Stocks to Consider

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

A few better-ranked stocks in the Auto-Tires-Trucks sector are Spartan Motors, Inc. (NASDAQ:SPAR) , SPX Corporation (NYSE:SPXC) and BRP Inc. (NASDAQ:DOOO) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Spartan Motors has an estimated earnings growth rate of 85.42% for the ongoing year. The company’s shares have surged 117.3% in a year’s time.

SPX has an expected earnings growth rate of 23.18% for 2019. The company’s shares have surged 58.5% in the past year.

BRP has a projected earnings growth rate of 18.49% for the current year. Its shares have gained around 21.7% over the past year.

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