Magna International (MGA) Crushes Estimates, Announces 2:1 Split, Stock Buyback, Increases Dividend by 20%

If Magna International (MGA) were involved in the 'cloud space' (even 10% of revenue, which now gives you the massive overvaluation) this sort of beat would have the stock up 20%+ on this sort of report.  Too bad you cannot build auto frames in the cloud.   Not much I can add here that I did not say the past week with TRW Automotive (TRW) and BorgWarner (BWA).

EPS estimate for the quarter was $1.52; the company came in at $2.06 - a beat of 5 cents.  This immediately takes full year estimates of $7.83 up to roughly $8.40.   Fourth quarter's estimates of $1.61 again looks silly.  Assuming they can do $2.00 next Q, we take the $8.40 for the year and raise it to $8.80.   Therefore I've just raised full year estimates up 13% or about a dollar.   At roughly $100, this gives a forward PE of 11.

Additionally, (a) a 2:1 split, (b) a stock buyback, and (c) dividend raised 20% to $0.36 presplit ($0.18 post split)  Raised guidance, yada, yada, yada.  Increased content in each auto to boot.  News like this would have Netflix up 30%, Magna snored through only a 4% gain in after hours.  "Oh, Canada..."


As stated yesterday, this group is strikingly similar to fertilizer stocks circa fall 2007 thru early 2008.  Highly levered operations (great on the upside, not so great on the downside), and analysts are completely missing the upside story via estimates.  This is allowing for big beat, after big beat.  But like the fertilizer stocks circa mid 2008 - eventually analysts will catch up and somewhere down the road a "miss" will come in, and crush the stocks... although these will never reach the 'momo' status of the fertilizer group back then.  And so goes the cycle of (stock) life.

(full report here)

Via Reuters:

• Auto-parts maker Magna International  (MGA) reported quarterly earnings on Thursday that soundly beat analysts' expectations as sales benefited from the rebound in North American auto production.  
• The company said it now expects 2010 consolidated sales of $23.5 billion to $24 billion, up from its outlook released at the end of the second quarter of $22 billion to $23 billion.
• The Aurora, Ontario-based company said it earned $241 million, or $2.06 a share, in the third quarter, compared with $51 million, or 45 cents a share, in the year-earlier period.
• Revenue rose 27 percent to $5.9 billion.
• Analysts expected the company to earn $1.52 a share on revenue of $5.4 billion.
• "We're seeing these huge year over year changes in North American auto production volumes and that can cause results to miss consensus, because often analysts underestimate the power of operating leverage," said Chicago-based Morningstar analyst David Whiston. (amen brother)
• David Tyerman, an analyst at Canaccord Genuity said the big upside surprise at Magna was helped by higher content per vehicle in both North America and Europe.  "Guidance looks strong, so (it's) probably sustainable," he added.
• Average dollar content per vehicle rose 9 percent in North America and 8 percent in Europe from a year earlier. North American vehicle production was up 28 percent, while European vehicle production slipped 1 percent from a year ago.

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