Magna Stays at Neutral - Analyst Blog
May 29 2013 - 3:57PM
Zacks
On May 27, we maintained our Neutral recommendation on
Magna International Inc. (MGA) based on its
improved first quarter 2013 performance, increased customer
preferences for light passenger vehicles and stricter regulation by
U.S. government. However, we are concerned about the negative
impact associated with the import of parts from low-cost countries
and rising raw material costs.
Why Maintained?
On May 10, Magna reported earnings per share of $1.57 in the first
quarter of 2013, up 7.5% from $1.46 in the year-ago quarter and
outpaced the Zacks Consensus Estimate of $1.40. Net income
increased 7.6% to $369.0 million from $343.0 million in the
year-ago quarter.
Revenues went up 9.1% to $8.4 billion in the reported quarter,
exceeding the Zacks Consensus Estimate of $7.9 billion. The
increase was driven by improvement in North American and Rest of
World (ROW) production sales and higher tooling, engineering and
other sales.
Following the release of the first quarter results, the Zacks
Consensus Estimate for 2013 went up 4.8% to $5.88 per share and for
2014 it improved 5.9% to $6.99 per share.
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
Some stocks that are performing well in the industry include
Tower International, Inc. (TOWR),
Federal-Mogul Corp. (FDML) and Visteon
Corp. (VC). All these companies carry a Zacks Rank #1
(Strong Buy).
FEDERAL MOGUL-A (FDML): Free Stock Analysis Report
MAGNA INTL CL A (MGA): Free Stock Analysis Report
TOWER INTL INC (TOWR): Free Stock Analysis Report
VISTEON CORP (VC): Free Stock Analysis Report
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