Company Reports

Magna's stock fell on July 31 despite second-quarter adjusted diluted earnings per share of USD 1.86 that comfortably beat the USD 1.50 LSEG consensus. Management also increased 2026 guidance for free cash flow and adjusted EPS; the latter is now USD 6.70-USD 7.30, up from USD 6.25-USD 7.25.

Magna International is one of the largest and most diversified auto-parts suppliers in the world, but that size does not ensure economic profit. While breadth in products and services can be advantageous regarding cross-selling—commercial activities that bolster content per vehicle and market penetration—we don’t see margins getting high enough to merit moatworthy returns on invested capital because of the multiple competitors in Magna’s largest segments, though they're close. Magna enjoys customer switching costs, which are common to auto suppliers with moats, but its financial performance, although good, does not quite merit one. Magna's revenue mix is over 75% from Detroit Three and German automakers that suffer from US-imposed tariffs, though Magna gets reimbursed for most of it.

Magna's stock closed down 4.5% in May 1 trading after the firm reported first-quarter adjusted diluted earnings per share of $1.38 that beat the $1.01 LSEG consensus. Management maintained full-year adjusted EPS guidance and repurchased $440 million of stock plus another $136 million in April.

Magna International is one of the largest and most diversified auto-parts suppliers in the world, but that size does not guarantee economic profit. While breadth in products and services can be advantageous regarding cross-selling—commercial activities that bolster content per vehicle and market penetration—we don’t see margins getting high enough to merit moatworthy returns on invested capital because of the multiple competitors in Magna’s largest segments, though they're close. Magna enjoys customer switching costs, which are common to auto suppliers with moats, but its financial performance, although good, does not quite merit one. Magna's revenue mix is over 75% from Detroit Three and German automakers that suffer from US-imposed tariffs, though Magna gets reimbursed for most of it.

Magna International is one of the largest and most diversified auto-parts suppliers in the world, but that size does not guarantee economic profit. While breadth in products and services can be advantageous regarding cross-selling—commercial activities that bolster content per vehicle and market penetration—we don’t see margins getting high enough to merit moatworthy returns on invested capital because of the multiple competitors in Magna’s largest segments, though they're close. Magna enjoys customer switching costs, which are common to auto suppliers with moats, but its financial performance, although good, does not quite merit one. Magna's revenue mix is over 75% from Detroit Three and German automakers that suffer from US-imposed tariffs, though Magna gets reimbursed for most of it.

Magna's fourth-quarter adjusted diluted EPS rose 29% year over year to $2.18 and beat the $1.79 LSEG consensus. The stock rose over 20% during Feb. 13 trading on the results and the company issuing above-consensus 2026 EPS guidance of $6.25-$7.25 versus $5.99.

Magna International is one of the largest and most diversified auto-parts suppliers in the world, but that size does not guarantee economic profit. While breadth in products and services can be advantageous regarding cross-selling—commercial activities that bolster content per vehicle and market penetration—we don’t see margins getting high enough to merit moatworthy returns on invested capital because of the multiple competitors in Magna’s largest segments, though they're close. Magna enjoys customer switching costs, which are common to auto suppliers with moats, but its financial performance does not quite merit one. Magna's revenue mix is over 70% from Detroit Three and German automakers that will suffer from US-imposed tariffs, though Magna gets reimbursed for most tariff costs.

Magna International is one of the largest and most diversified auto-parts suppliers in the world, but that size does not guarantee economic profit. While breadth in products and services can be advantageous regarding cross-selling—commercial activities that bolster content per vehicle and market penetration—we don’t see margins getting high enough to merit moatworthy returns on invested capital because of the multiple competitors in Magna’s largest segments, though they're close. Magna enjoys customer switching costs, which are common to auto suppliers with moats, but its financial performance does not quite merit one. Magna's revenue mix is over 70% from Detroit Three and German automakers that will suffer from US-imposed tariffs, though Magna gets reimbursed for most of its own tariff costs.

Magna reported third quarter adjusted diluted EPS of $1.33, up 3.9% year-over-year. The company announced a new share buyback program for about 9% of the diluted share count. It also raised 2025 revenue, equity income, and adjusted EBIT margin guidance.

Magna's second-quarter adjusted diluted EPS of $1.44 rose 6.7% year over year and beat the $1.14 LSEG consensus. Management also lowered its net 2025 tariff expense guidance to $200 million from $250 million and raised the low end of 2025 adjusted EBIT margin guidance to 5.2% from 5.1%.

Magna International is one of the largest and most diversified auto-parts suppliers in the world, but that size does not guarantee economic profit. While breadth in products and services can be advantageous regarding cross-selling—commercial activities that bolster content per vehicle and market penetration—we don’t see margins getting high enough to merit moatworthy returns on invested capital because of the multiple competitors in Magna’s largest segments, though they're close. Magna enjoys customer switching costs, which are common to auto suppliers with moats, but its financial performance does not quite merit one. Magna's revenue mix is over 70% from Detroit Three and German automakers that will suffer from US-imposed tariffs if they last for all of President Donald Trump's term.

Magna's first-quarter adjusted diluted EPS fell 38.5% year over year to $0.78 and missed the $0.90 LSEG consensus. The company had guided for the first quarter to be the lowest one of 2025 but said results still came in broadly ahead of its expectations. It also amended 2025 guidance.

Magna International is one of the largest and most diversified auto-parts suppliers in the world, but that size does not guarantee economic profit. While breadth in products and services can be advantageous regarding cross-selling—commercial activities that bolster content per vehicle and market penetration—we don’t see margins getting high enough to merit moatworthy returns on invested capital because of the multiple competitors in Magna’s largest segments. The company enjoys customer switching costs, which are common to auto suppliers with moats, but its financial performance does not quite merit one. Magna's revenue mix is over 70% from Detroit Three and German automakers that will suffer from US-imposed tariffs if they last for all of President Donald Trump's term.

Magna International is one of the largest and most diversified auto-parts suppliers in the world, but that size is no guarantee of economic profit. While breadth in products and services can be advantageous regarding cross-selling—commercial activities that bolster content per vehicle and market penetration—we don’t see margins getting high enough to merit moatworthy returns on invested capital because of the multiple competitors in Magna’s largest segments. The company enjoys customer switching costs, which are common to auto suppliers with moats, but its financial performance does not quite merit one. Magna's revenue mix is over 70% from Detroit Three and German automakers that will suffer from US-imposed tariffs if they last for all of President Donald Trump's term.

The White House on March 5 said that the 25% tariffs on vehicles imported into the US from Canada and Mexico that began a day earlier will be delayed for one month, provided those vehicles comply with the United States-Mexico-Canada Agreement. The change came after President Donald Trump spoke with the leaders of the Detroit Three, who argued that the tariffs hurt firms such as theirs but not those that export vehicles into the US from nations such as Japan, Germany, and South Korea. White House comments to the media on March 5 indicate that tariffs on all vehicle imports regardless of the country of origin will still commence on April 2, so we think 25% or reciprocal tariffs will start at that time.

The 25% tariffs on all US imports from Canada and Mexico began on March 4. As discussed in our Nov. 26 note on General Motors and Ford, these tariffs are punishment for what President Donald Trump feels are inadequate measures by these two nations and China for fentanyl and illegal immigration into the US. Lately, White House rhetoric seems more focused on fentanyl than immigration. We consider these tariffs very bad news for our US autos coverage, but for now, we are leaving our fair value estimates in place.

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%.

Magna International is one of the largest and most diversified auto-parts suppliers in the world, but that size is no guarantee of economic profit. While breadth in product and services can be advantageous regarding cross-selling—commercial activities that bolster content per vehicle and market penetration—we don’t see margins getting high enough to merit moatworthy returns on invested capital due to multiple competitors in Magna’s largest segments. The company enjoys customer switching costs, which are common to auto suppliers with moats, but its financial performance does not quite merit one.

We expect trade policy and electric vehicle tax credits to be the US auto industry focus of a second US presidential term for Donald Trump. Emission regulations will also likely come into play, as we don't expect the Trump administration to grant California a waiver to set its own rules under the Clean Air Act of 1970. We also expect Environmental Protection Agency rules for 2027-32 model years issued in March, which, relative to the 2026 rule, call for a nearly 50% reduction in average light vehicle fleet carbon dioxide emissions for 2032 down to 85 grams (73 for cars and 90 for trucks) of C02 per mile, to be reduced or eliminated.

Magna’s third-quarter earnings continue to reflect headwinds of declining customer vehicle production across North America, Europe, and China. Adjusted diluted EPS of $1.28 fell 12.3% year over year and missed the $1.40 LSEG consensus. However, the stock rose over 6% during Nov. 1 trading due to the company announcing a long-awaited share repurchase program that is expected to commence around Nov. 7. It will expire one year later and is for up to about 28.5 million shares, or about 10% of the company. Management indicated the buyback’s timing is accelerated from earlier plans, which to us reflects the team recognizing investor frustration and supports August earnings call comments from the CEO that a buyback is the best use of capital. We like the move a lot as Magna keeps a conservative leverage ratio and its stock is well below our fair value estimate. Despite the buyback, lower 2024 guidance causes a slight reduction in our fair value estimates to $62 from $64 and CAD 87 from CAD 89.