Magna shares tumble 5% on earnings miss

AURORA, Ontario – Magna International (NYSE:) Inc. (TSX: MG; NYSE: MGA) reported a significant earnings miss in the first quarter of 2024.

The automotive supplier announced adjusted earnings per share (EPS) of $1.08, falling short of the analyst consensus of $1.25. Despite meeting revenue expectations with $10.97 billion, which aligns with the consensus estimate, the company’s shares dropped by 4.94% as the market responded negatively to the earnings shortfall.

The company’s sales saw a modest increase of 3% to $11.0 billion compared to the first quarter of the previous year, slightly outpacing the 2% rise in global light vehicle production. This growth was attributed to new program launches and the acquisition of Veoneer (NYSE:) Active Safety. However, challenges such as lower volumes in the Complete Vehicles segment and currency fluctuations weighed on the results.

Magna also disclosed asset impairments and restructuring costs totaling $316 million related to Fisker (OTC:), which impacted the net income attributable to Magna International Inc., decreasing it to $9 million for the quarter from $209 million in the same period last year. The diluted EPS for the quarter was reported at $0.03, a stark decrease from $0.73 in the first quarter of 2023.

The company maintained its 2024 Adjusted EBIT Margin Outlook range of 5.4%-6.0%, indicating stability in its future financial expectations. In the press release, management highlighted operational excellence and cost initiatives, productivity and efficiency improvements, and lower costs at certain previously underperforming facilities as key contributors to the adjusted EBIT increase to $469 million from $449 million in the first quarter of 2023.

Magna’s CEO commented on the results, emphasizing the company’s commitment to operational improvements and cost efficiency, which have helped to mitigate some of the negative impacts on profitability. However, the market’s reaction suggests that investors were expecting a stronger performance.

The company’s financial health remains solid, with $591 million generated from operations before changes in operating assets and liabilities and a return of $134 million to shareholders through dividends. Looking ahead, Magna’s full-year outlook remains unchanged.

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