Magna Q1 Earnings Beats, Shares Down - Analyst Blog

Despite posting earnings beat, share price of Magna International Inc. MGA decreased 0.6% on May 8, due to the impact of the overall market decline. The company reported adjusted earnings per share of $1.99 for the first quarter of 2014, which surpassed the Zacks Consensus Estimate of $1.95. Meanwhile, earnings improved 25.2% year over year from $1.59 in the first quarter of 2013.

Revenues went up 7.2% to $8.96 billion in the reported quarter, beating the Zacks Consensus Estimate of $8.88 billion. The rise was driven by increased production sales in North America, Europe and Asia, together with higher tooling, engineering and other sales and improved complete vehicle assembly sales. This was partially offset by a decline in Rest of World (ROW) production sales.

Vehicle production rose 4% to 4.19 million units in North America and 8% to 5.13 million units in Europe. Operating income increased 27.1% to $581 million in the quarter from $457 million in the year-ago quarter.

Segment Details

Revenues from the External Production segment (comprising North America, Europe, Asia and ROW units) went up 8.1% to $7.6 billion in the reported quarter.

Revenues from North America increased 9% to $4.4 billion, driven by product launches and the positive impact of increased production.

Revenues from Europe went up 8% to $2.6 billion in the period. The year-over-year improvement was attributable to the launch of new programs and higher production volume.

Revenues from Asia surged 25% to $381 million in the reported quarter. The improvement was attributable to higher production volume and benefits from new launches.

Revenues from ROW decreased 26% to $157 million due to unfavorable currency translations and lower production volume.

Revenues from the Complete Vehicle Assembly segment went up 2% to $813 million in the quarter. However, assembly volumes declined 5% to 35,658 units.

Revenues from Tooling, Engineering & Other segment expanded 3% to $569 million in the quarter.

Financial Update

Magna International had $1.4 billion in cash and cash equivalents as of Mar 31, 2014, compared with $1.6 billion as of Dec 31, 2013. The company had long-term debt of $293 million as of Mar 31, 2014, as against $332 million as of Dec 31, 2013.

In the first quarter of 2014, Magna International's cash flow from operations increased to $474 million from $151 million a year ago. Capital expenditures increased to $217 million in the period from $194 million in the first quarter of 2013.

Dividend

The board of directors of Magna International declared a quarterly dividend of 38 cents per share. The dividend is payable on Jun 13, 2014 to shareholders of record as of May 30, 2014.

Outlook

For full-year 2014, Magna International increased the revenues guidance for the External Production segment to $29.2–$30.5 billion. Complete Vehicle Assembly sales are projected in the range of $2.9–$3.2 billion.

For 2014, total revenue of the company is expected between $34.9 billion and $36.6 billion. Operating margin is projected to be around 6% with a tax rate of 24.5%. Capital expenditures are anticipated to be 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 #2 (Buy).

Other better-performing stocks in the industry include Gentherm Incorporated THRM, Modine Manufacturing Company MOD and Tower International, Inc. TOWR. All these stocks sport a Zacks Rank #1 (Strong Buy).