Magna (MGA) Up 3.5% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Magna (MGA). Shares have added about 3.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Magna due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Magna Earnings Surpass Estimates in Q2, Decline Y/Y

Magna delivered adjusted earnings per share of $1.59 in second-quarter 2019, beating the Zacks Consensus Estimate of $1.57. However, the bottom line was lower than the year-ago quarter’s figure of $1.67.

The company’s revenues declined 1% year over year to $10.1 billion. However, its revenues surpassed the Zacks Consensus Estimate of $10 billion.

Adjusted EBIT declined to $677 million from the year-ago figure of $803 million.

Segmental Performances

Revenues at the Body Exteriors & Structures segment declined 6.8% year over year to $4.2 billion in the reported quarter. Adjusted EBIT was down to $413 million from the prior-year quarter’s figure of $388 million.

Revenues at the Power & Vision segment moved down to $2.8 billion from the prior-year quarter figure of $3.2 billion. Adjusted EBIT declined to $201 million from $299 million in second-quarter 2018.

Revenues from the Seating Systems segment rose to $1.45 billion in the quarter under review. Adjusted EBIT declined to $83 million from $117 million recorded in the prior year.

Revenues at the Complete Vehicles segment rose 40.8% year over year to $1.8 billion. Adjusted EBIT grew to $43 million from $1 million in second-quarter 2018.

Financials

Magna had $563 million of cash and cash equivalents as of Jun 30, 2019, compared with $684 million as of Dec 31, 2018. It had long-term debt of $3.1 billion as of Mar 31, 2019, similar to the figure recorded as of Dec 31, 2018.

At the end of second-quarter 2019, the company’s cash flow from operations was $920 million in comparison with $467 million recorded at the end of second-quarter 2018.

Capital Deployment

Magna’s board of directors announced a dividend of 36.5 cents per share for the second quarter of 2019. This dividend will be paid on Sep 6, 2019, to shareholders of record as of Aug 23, 2019.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Magna has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Magna has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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