On Mar 26, we maintained our Neutral recommendation on
Magna International Inc.
) based on its better performance in the fourth quarter of 2012
and increased customer preferences for light passenger vehicles.
However, we are concerned about the rising raw material costs and
the company's increasing debt burden.
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On Mar 1, Magna reported earnings per share of $1.49 in the
fourth quarter of 2012, which increased 12.9% from $1.32 in the
year-ago quarter and outpaced the Zacks Consensus Estimate of
Revenues went up 10.8% to $8.03 billion, exceeding the Zacks
Consensus Estimate of $7.75 billion. The increase in revenues was
driven by improvement in North American and Rest of World (ROW)
production sales and higher tooling, engineering and other sales
together with improved complete vehicle assembly sales.
Following the release of the fourth quarter results, the Zacks
Consensus Estimate for 2013 went up 2.2% to $5.49 per share.
Meanwhile, the Zacks Consensus Estimate for 2014 improved 3.7% to
$6.53 per share. Currently, Magna maintains a Zacks Rank #3
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
Few stocks that are performing well in the industry where Magna
). All these companies carry a Zacks Rank #1 (Strong Buy).