Magna stock rises as auto parts maker outperforms European market

TORONTO – Magna International Inc. (TSX:MG) raised its sales outlook for the year and reported improved first-quarter earnings Friday despite a weak start to the year for the auto industry.

CIBC analyst Todd Coupland said Magna “dramatically” outperformed the market in Europe by producing more content per vehicle, despite a nine per cent decrease in production.

“They’re growing their market share on various platforms in Europe,” he said. “As a result, earnings were quite a bit stronger than what we expected.”

Coupland also said he expects the company to make some gains in North America as the auto market improves.

“You have old cars on the road that need to be replaced,” he said.

“You have attractive financing. And you have the employment and new housing start picture looking better. That’s all a backdrop for people buying cars. So that should continue, and Magna will benefit from that.”

The Ontario-based part manufacturer and vehicle assembly company said it now expects sales for the year to be between $32.6 billion and $34 billion, compared to its March outlook for between $32 billion and $33.4 billion.

Magna also reported an increase in earnings, as net profits attributable to shareholders rose to US$369 million or $1.57 per diluted share for the quarter ended March 31. That compared with US$343 million or $1.46 per share for the same period last year.

The average analyst estimate had been for a profit of $1.45 per share, according to Thomson Reuters.

Revenue improved to US$8.36 billion, up from US$7.67 billion a year ago.

In a note, BMO analyst Peter Sklar said a low tax rate and other unquantified unusual items could have positively impacted earnings by a few cents per share.

“As a result, we consider earnings to be slightly in excess of our estimate of $1.41 per share,” Sklar said.

Magna noted the nine per cent increase in revenue came amid a meagre one per cent increase in vehicle production in North America.

“Our North American, European and rest of world production sales, as well as tooling, engineering and other sales all increased in the first quarter of 2013 relative to the comparable quarter in 2012,” the company said in a statement.

Complete vehicle assembly sales increased 33 per cent to US$798 million for the first quarter of 2013 compared with US$599 million for the first quarter of 2012, while complete vehicle assembly volumes increased 25 per cent to about 37,000 units.

Magna has 315 manufacturing operations and 87 product development, engineering and sales centres in 29 countries and employees some 121,000 workers.

Shares in the company closed up $2.25 or about 3.6 per cent at $65.46 on the Toronto Stock Exchange.