Magna International (MGA) Beats Q3 Earnings, Shares Rise - Analyst Blog

Share price of Magna International Inc. ( MGA ) increased 2% to $104.95 on Nov 6, after the company reported adjusted earnings per share of $2.22 for the third quarter of 2014, surpassing the Zacks Consensus Estimate of $1.95. Also, earnings improved 45.1% from $1.53 in the third quarter of 2013.

Revenues went up 5.8% to $8.82 billion in the reported quarter, in line with the Zacks Consensus Estimate. The year-over-year increase came on the back of increased production sales in North America and Asia, tooling, engineering and other sales, and complete vehicle assembly sales, partially offset by Rest of World ("ROW") and European production sales.

Meanwhile, vehicle production rose 8% to 4.2 million units in North America and 4% to 4.65 million units in Europe. Operating income increased 50.6% to $589 million in the reported quarter from $391 million in the year-ago quarter.

Segment Details

Revenues from the External Production segment (comprising North America, Europe, Asia and ROW units) went up 5.7% year over year to $7.36 billion in the reported quarter.

Sales in North America increased 10% to $4.43 billion, driven by product launches. Revenues from Europe inched down 1% year over year to $2.3 billion in the third quarter due to lower production volumes and decrease in content on certain programs. Revenues from Asia surged 13% to $406 million in the reported quarter. The improvement is attributable to increased production and benefits from new launches in China. Revenues from ROW decreased 17% to $179 million due to lower U.S. dollar sales and production volumes.

Revenues at the Complete Vehicle Assembly segment totaled $740 million, compared with $680 million a year ago. Also, Assembly volumes declined 5% to 32,204 units.

Revenues from the Tooling, Engineering & Other segment increased 3% to $719 million in the quarter under review.


Magna International had $1.44 billion in cash and cash equivalents as of Sep 30, 2014, compared with $1.6 billion as of Dec 31, 2013. The company had long-term debt of $1.02 billion as of Sep 30, 2014, as against $332 million as of Dec 31, 2013.

In the first nine months of 2014, Magna International's cash flow from operations increased to $1.79 billion from $1.31 billion a year ago. On the other hand, capital expenditures rose to $916 million in the period from $706 million in the first nine months of 2013.

Capital Deployment

During the third quarter of 2014, Magna International repurchased 5.7 million shares for $614 million. Subsequent to the end of third-quarter 2014, the company repurchased an additional 1.1 million shares for $98 million.

In addition, the Board of Directors of Magna International has approved a new repurchase program of up to 20 million shares. This represents around 9.8% of the public float of shares.


The company's Board of Directors declared a quarterly dividend of 38 cents per share. The dividend is payable on Dec 12 to shareholders of record as of Nov 28, 2014.


For full-year 2014, Magna International decreased its revenue guidance for the External Production segment to $29.8-$30.7 billion from $29.8-$31.1 billion. Meanwhile, Complete Vehicle Assembly sales are projected in the range of $3.1-$3.3 billion, compared to the previous guidance of $3-$3.3 billion.

For 2014, total revenue of the company is expected between $35.8 and $37 billion, compared with the previous estimate of $35.6-$37.3 billion. Operating margin is projected at around 6.9% with a tax rate of 24.5%, while capital expenditures are anticipated at around $1.4 billion.

Magna International, based in Aurora, Canada, is a leading manufacturer and supplier of automotive components. The company designs, develops and manufactures automotive systems, assemblies, modules and components, apart from engineering and assembling complete vehicles, primarily for sale to original equipment manufacturers of cars and light trucks. The company currently carries a Zacks Rank #3 (Hold).

Better-ranked automobile stocks worth considering include Gentex Corp. ( GNTX ), Toyota Motor Corporation ( TM ) and STRATTEC Security Corporation ( STRT ), each sporting a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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