Magna Stays Neutral - Analyst Blog
02 April 2013 - 1:00AM
Zacks
On Mar 26, we maintained our Neutral recommendation on
Magna International Inc. (MGA) 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.
Why Maintained?
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 $1.14.
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
(Hold).
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
operates include Gentherm Incorporated (THRM),
Visteon Corp. (VC) and Denso
Corp. (DNZOY). All these companies carry a Zacks Rank #1
(Strong Buy).
DENSO CORP (DNZOY): Get Free Report
MAGNA INTL CL A (MGA): Free Stock Analysis Report
GENTHERM INC (THRM): Free Stock Analysis Report
VISTEON CORP (VC): Free Stock Analysis Report
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