On May 27, we maintained our Neutral recommendation on
Magna International Inc.
) based on its improved first quarter 2013 performance, increased
customer preferences for light passenger vehicles and stricter
regulation by U.S. government. However, we are concerned about
the negative impact associated with the import of parts from
low-cost countries and rising raw material costs.
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On May 10, Magna reported earnings per share of $1.57 in the
first quarter of 2013, up 7.5% from $1.46 in the year-ago quarter
and outpaced the Zacks Consensus Estimate of $1.40. Net income
increased 7.6% to $369.0 million from $343.0 million in the
Revenues went up 9.1% to $8.4 billion in the reported quarter,
exceeding the Zacks Consensus Estimate of $7.9 billion. The
increase was driven by improvement in North American and Rest of
World (ROW) production sales and higher tooling, engineering and
Following the release of the first quarter results, the Zacks
Consensus Estimate for 2013 went up 4.8% to $5.88 per share and
for 2014 it improved 5.9% to $6.99 per share.
Magna will benefit from the increased customer preferences for
light passenger vehicles. In addition, the strict U.S. government
regulation to curb emissions will boost the demand for auto parts
and other fuel efficient components.
However, import of parts and other valuable accessories from
low-cost countries like India, China, Brazil, Japan and other
ASEAN countries will mar the results of the company. In addition,
rising raw material costs will be challenging for auto parts and
accessories manufacturers such as Magna.
Other Stocks to Look For
Some stocks that are performing well in the industry include
Tower International, Inc.
). All these companies carry a Zacks Rank #1 (Strong Buy).