Shares in auto parts maker Martinrea fall 17 per cent on Q3 earnings

TORONTO – Shares in auto parts maker Martinrea International Inc. (TSX:MRE) closed down more than 17 per cent after Canaccord Genuity downgraded the stock following lower than expected earnings.

Its stock fell $2.18 to end Tuesday at $10.14 on the Toronto Stock Exchange.

Analyst David Tyerman said Canaccord Genuity downgraded the stock to hold from buy and cut his price target to $11 from $17 on a lower forecast and valuation of the company.

“Our forecast was cut on lower than expected 2015 sales guidance and a slower than expected margin expansion,” he wrote in a note.

Martinrea hopes to improve its margins in coming years, but Tyerman noted that execution of the company’s plan has experienced several interruptions.

“We think some caution is warranted with respect to the plan given 1) repeated backward steps in recent years, and 2) risks associated with a very substantial new facility launch program. At the very least, we would like to see more substantial investment return upside before recommending that investors buy MRE shares. Accordingly, we continue our HOLD rating for MRE shares.”

Martinrea, which makes automotive parts, assemblies and modules, and fluid management systems with a focus on the auto industry, reported Monday that it had $19.4 million of net earnings attributable to shareholders, or 23 cents per share, for the three months ended Sept. 30. That was down from $20.9 million or 25 cents in the same period a year earlier.

The earnings came in below analyst estimates of 25 cents per share, according to Thomson Reuters.

Martinrea’s revenue rose to a record $859.5 million from $767.9 million. But revenue, excluding tooling revenue, was about $785 million, at the low end of the company’s guidance due to lower production volumes at key vehicle platforms in North America. Revenues for the quarter, excluding tooling revenues, should be in the range of $825 million to $845 million,

Martinrea employs about 14,000 workers at 40 operating divisions in Canada, the United States, Mexico, Brazil, Germany, Slovakia, Spain and China.