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Magna International (MGA) Q2 Earnings Top, Revenues Lag - Analyst Blog

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Magna International Inc.MGA reported adjusted earnings per share of $1.29 in the second quarter of 2015 that surpassed the Zacks Consensus Estimate of $1.17. Also, earnings improved 9.3% from $1.18 recorded in the second quarter of 2014.

Meanwhile, revenues went down 8.7% year over year to $8.13 billion in the reported quarter and also missed the Zacks Consensus Estimate of $8.26 billion. The year-over-year fall in revenues can be attributed to the weakening of the euro and Canadian dollar against the U.S. dollar. Excluding the impact of foreign currency translation, sales improved 1% in the quarter.

Vehicle production increased 3% to 4.55 million units in North America and vehicle production was at par with the year-ago level of 5.3 million units in Europe. Operating income improved 3.1% to $726 million in the reported quarter from $704 million in the year-ago quarter.

Segment Details

Revenues from the External Production segment (comprising North America, Europe, Asia and ROW units) declined 6.8% year over year to $6.93 billion in the reported quarter.

Sales in North America climbed 1% to $4.6 billion, driven by product launches. Revenues from Europe declined 23% year over year to $1.8 billion in the second quarter owing to lower production volumes, net customer price concessions and a drop in U.S sales. Revenues from Asia stood at $390 million in the reported quarter, flat year over year. The improvement can be attributed to benefits from new launches in China and India. Revenues from ROW decreased 23% to $125 million due to lower U.S. dollar sales and production volumes.

Revenues at the Complete Vehicle Assembly segment totaled $607 million, down 26% from $817 million a year ago. Also, Assembly volumes declined 17% to 28,343 units.

Revenues from the Tooling, Engineering & Other segment deteriorated 10% to $599 million in the quarter under review.

Financials

Magna International had $1.16 billion of cash and cash equivalents as of Jun 30, 2015, compared with $1.25 billion as of Dec 31, 2014. The company had long-term debt of $963 million as of Jun 30, 2015, compared with $995 million as of Dec 31, 2014.

In the first half of 2015, Magna International's cash flow from operations decreased to $720 million from $1.1 billion a year ago. On the other hand, capital expenditures rose to $627 million in the first half of 2015 from $565 million in the first half of 2014.

Dividend

The company's board of directors declared a quarterly dividend of 22 cents per share. This dividend is payable on Sep 11 to shareholders on record as of Aug 28, 2015.

Outlook

For full-year 2015, Magna International projects revenues for the External Production segment in the band of $26.2-$27.5 billion. Meanwhile, Complete Vehicle Assembly sales are projected in the range of $2.2-$2.5 billion.

For 2015, total revenue of the company is expected between $30.9 billion and $32.6 billion. Operating margin is projected at around 8% with a tax rate of 26%, while capital expenditures are anticipated in the $1.3-$1.5 billion band.

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 #4 (Sell).

Stocks to Consider

Better-ranked automobile stocks include Ford Motor Co. F , O'Reilly Automotive Inc. ORLY and PACCAR Inc. PCAR . All the stocks carry a Zacks Rank #2 (Buy).

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FORD MOTOR CO (F): Free Stock Analysis Report

PACCAR INC (PCAR): Free Stock Analysis Report

O REILLY AUTO (ORLY): Free Stock Analysis Report

MAGNA INTL CL A (MGA): Free Stock Analysis Report

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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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