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Magna (MGA) Rides on Innovation & Launches Amid Currency Woes

Zacks Equity Research

On Aug 16, we issued an updated research report on Magna International MGA.

The Aurora, Canada-based company is a manufacturer and supplier of complete automotive components. Apart from engineering and assembling complete vehicles, the company designs, develops and manufactures automotive systems, assemblies, modules and components primarily for sale to original equipment manufacturers (OEMs) of cars and light trucks.

In second-quarter 2019, Magna’s earnings and revenues surpassed the Zacks Consensus Estimate. However, its earnings and revenues declined on a year-over-year basis.

Magna focuses on innovation, technology development and program launches across its business segments to meet the rising demand for crossover & SUVs. Currently, it is actively working to develop ADAS technology, which will offer basic safety and convenience functions in vehicles.

Moreover, Magna is expanding business through joint ventures (JVs) and hub openings while divesting non-core units. In second-quarter 2019, the company inked a framework agreement for an electric vehicle manufacturing joint venture with an affiliate of BAIC. In April 2019, Magna formed a JV with GAC Component in China to manufacture composite liftgates for the latter’s crossover vehicles.

However, soaring launch costs is concerning for the company. It expects the same to rise further in the forthcoming quarters. Moreover, fluctuating foreign currencies and stronger US dollar along with customer price concessions are likely to hurt the company’s bottom line.

In the past three months, shares of Magna have outperformed the industry it belongs to. Shares of the company have gained 8.7% against the industry’s decline of 0.4%.

Zacks Rank & Stocks to Consider

Currently, Magna carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the auto space are Fox Factory Holding Corp FOXF, CarMax, Inc. KMX and Gentex Corporation GNTX, each presently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Fox Factory has an expected long-term growth rate of 16.7%. In the past six months, shares of the company have rallied 20.7%.

CarMax has an expected long-term growth rate of 12.6%. In the past six months, shares of the company have risen 36.3%.

Gentex has an expected long-term growth rate of 5%. In the past six months, shares of the company have returned 29.5%.

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