Magna (MGA) Q1 Earnings and Sales Top Estimates, Down Y/Y

Magna International Inc. MGA reported adjusted first-quarter 2020 earnings per share of 86 cents, beating the Zacks Consensus Estimate of 74 cents. Higher-than-expected EBIT from the Complete Vehicles segment can be attributed to this outperformance. Precisely, EBIT from the unit came in at $50 million, topping the consensus mark of $36.3 million.

However, the bottom line declined from the year-ago quarter’s $1.63. Lower year-over-year revenues across all segments amid coronavirus woes led to the dismal results. The company’s total revenues declined 18.3% year over year to $8,657 million. However, the reported figure surpassed the Zacks Consensus Estimate of $7,971 million.

Magna International Inc. Price, Consensus and EPS Surprise

 

Magna International Inc. Price, Consensus and EPS Surprise

Magna International Inc. price-consensus-eps-surprise-chart | Magna International Inc. Quote

Segmental Performances

The Body Exteriors & Structures segment’s revenues dropped 14.6% year over year to $3,676 million in the reported quarter. Lower global light vehicle production amid the COVID-19 pandemic and unfavorable currency translations resulted in soft revenues. Adjusted EBIT declined to $199 million from the prior-year quarter’s $363 million owing to lower tooling contribution, weak scrap steel and aluminum recoveries, operational inefficiency, as well as reduced sales.

The Power & Vision segment revenues fell to $2,523 million from the prior-year figure of $3,083 million. In addition to the negative impacts from forex and coronavirus, divestiture of the FP&C business also affected revenues. Consequently, adjusted EBIT declined to $135 million from $216 million recorded in first-quarter 2019.

Revenues in the Seating Systems segment decreased to $1,261 million in the January-March quarter from the prior-year figure of $1,433 million due to bleak light vehicle production, unfavorable foreign-currency translation impact and net customer-price concessions. Adjusted EBIT also declined to $40 million from $94 million recorded in the prior year amid lower sales, higher launch costs and operational inefficiency.

The Complete Vehicles segment’s revenues were down 31.5% from the prior-year quarter to $1,321 million. Nonetheless, adjusted EBIT grew to $50 million from $28 million on the back of a favorable engineering program resolution in first-quarter 2020. Further, a favorable mix within the Mercedes-Benz G-Class complete vehicle assembly program also aided profits.

Financials

Magna had $1,146 million cash and cash equivalents as of Mar 31, 2020 compared with $1,276 million on Dec 31, 2019. It had a long-term debt of $3,021 million as of Mar 31, 2020, reflecting a decline from $3,062 million recorded on Dec 31, 2019. The long-term debt-to-capital ratio was 0.23. The company generated cash from operating activities of $639 million during first-quarter 2020.

Dividend & Buyback

During the March-end quarter, it repurchased 4.8 million shares of common stock for $192 million. During the quarter, the firm paid dividends of $121 million.

Magna’s board of directors announced a dividend of 40 cents per share for first-quarter 2020, payable on Jun 5 to shareholders of record on May 22.

However, amid coronavirus-led uncertainty and financial crisis, the company halted the stock buyback program until further notice. It also refrained from providing annual view for 2020.

Zacks Rank & Key Picks

Currently, Magna carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the same sector include Veoneer, Inc. VNE, Unique Fabricating, Inc. UFAB and Modine Manufacturing Company MOD, each carrying a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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