Shares of auto supplier Magna soar on earnings

AP News
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Posted: Nov 06, 2009 12:59 PM

Shares of Magna International Inc. soared Friday after the Canadian auto supplier said it posted a $51 million third-quarter profit, blowing away Wall Street predictions.

In midday trading, Magna shares jumped $6.55, or 15 percent, to $50.75, after reaching as high as $49.02 earlier in the day.

Magna's profit amounted to 45 cents per share and compared with a loss of $215 million, or $1.93 per share, in the year-ago period. The prior quarter included $234 million, or $2.10 per share, in restructuring and impairment charges.

Sales fell 16 percent to $4.67 billion from $5.53 billion.

Analysts polled by Thomson Reuters expected a loss of 19 cents per share on $4.53 billion in revenue.

North American vehicle production dropped 20 percent to 2.3 million units during the quarter, while European production fell 9 percent to 2.9 million units.

But Magna's North American average dollar content per vehicle rose 8 percent for the quarter, while European average dollar content per vehicle remained flat. Complete vehicle assembly sales tumbled 38 percent to $428 million, while complete vehicle assembly volumes dropped 42 percent to about 14,700 units.

Fadi Chamoun of UBS Investment Research boosted his rating for Magna to "Buy" from "Neutral," citing better-than-expected overall sales and contributions from its North American operations.

"In addition to better than expected revenues, restructuring efforts that were undertaken in the past few quarters, particularly in North America, have enabled the company to significantly lower its fixed costs and restore profitability even at very depressed light vehicle production levels," Chamoun wrote in a note to investors.

In addition, Chamoun said the collapse of a deal to sell General Motors Co.'s Opel unit to Magna will allow the auto supplier to focus it efforts on being a supplier.

But Deutsche Bank's Rod Lache was more skeptical.

"We maintain our 'Hold' recommendation given concerns about Magna's revenue concentration, and uncertainty over the company's long-term strategy," Lache said.