Magna Earnings: Another 2026 Outlook Cut and Weak 2025 Revenue Necessitates Fair Value Reduction

Magna International’s fourth quarter was solid, included a dividend increase for the 15th straight year, and benefited from an easy year-over-year comparison due to the United Auto Workers strike in the prior-year quarter. However, management introduced 2025 guidance that fell well below LSEG consensus for revenue and cut its 2026 outlook after already reducing it on Aug. 2, both of which we see as disappointing. We are lowering our fair value estimate to USD 56/CAD 79 per share from USD 62/CAD 87, and we may make further changes once we roll our model forward for the 40-F filing. The change is from factoring in 2025 and 2026 guidance given on Feb. 14, which compared with our prior model led to reducing revenue over 2025-28 by 8.8%, equity income by 29.4%, and average operating income excluding equity income by 30 basis points to 5.8%. 2025 revenue guidance at its midpoint is USD 39.4 billion, far below the USD 42.4 billion consensus figure going into Feb. 14 earnings. Adjusted EBIT margin is guided at 5.3%-5.8%, while we were modeling 5.6% and now model 5.5%.