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Bear of the Day: Magna (MGA)

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Magna International MGA is still facing pressures from the semiconductor shortage. However, this Zacks Rank #5 (Strong Sell) is still expected to see earnings growth in 2022.

Magna is a global automotive supplier with 347 manufacturing facilities and 90 product development, engineering and sales centers in 28 countries.

Headquartered in Ontario, Canada, it has 154,000 employees and considers itself a mobility technology company as its involved with all aspects of the vehicle.

Semiconductor Shortage Still the Big Issue

On Sep 30, 2021, Magna reported its third quarter results and the semiconductor chip shortage was front and center.

Magna called it a "challenged" operating environment in its press release.

"As a result of semiconductor chip shortages, our customers' production schedules were unpredictable, causing labour and other operational inefficiencies at our facilities," Magna said in the third quarter press release.

"Semiconductor chip shortages and related production disruptions are expected to continue into 2022, and the negative impacts continue to exceed our expectations from earlier this year. Our results were also negatively impacted by inflationary cost increases in production inputs including freight, labour and commodities," the company said.

Estimates Cut for 2022

Given the ongoing semiconductor shortage, the analysts have gotten bearish on 2022.

1 estimate was cut in the last month for 2022 which is likely why the Rank has fallen to a Strong Sell.

The 2022 Zacks Consensus Estimate has fallen to $7.00 from $8.40 in the last 90 days, reflecting the bearishness.

This is still earnings growth of 47.7%, however, as Magna is expected to earn $4.74 in 2021.

The auto market is strong but the entire industry is facing the same challenges.

Shares are Cheap

Magna shares are up 22.1% over the last year but it's been a rocky ride.

Shares have gained 14.8% in the last month as some bargain hunters have jumped in.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

It's still cheap, with a forward P/E of 12.7.

It pays a dividend, currently yielding 1.9%.

For investors waiting to see if those earnings estimates will turn around once the semiconductor shortage eases, Magna is reporting its fourth quarter and end of the year 2021 results and will give its 2022 outlook on Feb 11, 2022.

Magna is one to keep on the short list for changes in the earnings estimates and the Zacks Rank.


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