Post by
retiredcf on May 06, 2021 11:10am
TD
This is a flash report so there's some potential for them to raise their current US$110.00 target. GLTA
Magna International Inc.
(MGA-N, MG-T) US$93.91 | C$115.04
Q1/21 First Look: Strong Q1/21 and Modest Guidance Increase Event
This morning, Magna International ("Magna") reported Q1/21 results that exceeded our forecast/consensus on the key metrics of sales/Adjusted EBITDA/ Adjusted EPS. Annual guidance for 2021 was also modestly increased from the company's prior forecast.
Impact: SLIGHTLY POSITIVE
Q1/21 Results (Exhibit 1)
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Sales: Consolidated sales of ~$10.2-billion (+17.6% y/y) were ~6.7% ahead of our forecast of $9.5bln, with outperformance in each segment with the exception of Seating. The y/y improvement was driven by higher global light vehicle production upon lapping the onset of the pandemic in Q1/20 (~$1.0bln), acquisitions ($238mm), new program launches, and the benefit of FX. These factors were offset in part by supply disruptions including the semiconductor chip shortage and net customer price concessions.
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Adjusted EBIT Margin: The consolidated EBIT margin was 7.6% (+291bps y/y) ~65bps ahead of our forecast of 6.9%. The y/y improvement was driven by Power & Vision and Body Exteriors and Structures. The outperformance we attribute to increments/scale (higher sales), higher equity income, lower engineering costs (ADAS in Power & Vision) and cost savings including the benefits of restructuring actions.
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Q1/21 Free Cash Flow: FCF of ~$414mm was above our forecast.
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Summary: Despite industry wide challenges, Q1/21 results were impressive relative to expectations including Adjusted EBITDA/EPS/FCF that were ahead of our forecast/consensus.
Guidance (Exhibit 1)
2021 Outlook: Despite the ongoing chip shortage, management modestly increased its 2021 guidance. At the mid-point, we derive 2021 Adjusted EBITDA of ~$4.5-billion (TD/consensus at $4.36/$4.35-billion) and Adjusted EPS of ~$7.65- to-7.70 (TD/consensus at $7.50/$7.45). This is a function of a modest increase in both forecast sales and the target operating margin range.
Conclusion: We view the release and guidance positively as, in spite of supply related changes within the industry, Magna delivered a strong financial performance (including FCF) and raised its 2021 outlook. The Q1 results in our view illustrate that these headwinds should be viewed as transient for Magna given its strong financial position, diversified portfolio and positioning for the evolution of mobility. We will update our outlook post the 7am call but our initial view is that we anticipate a positive reaction to the release.
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