What happened
Shares of auto-industry supplier Magna International (MGA +0.37%) were trading higher on Friday, after the company reported fourth-quarter earnings that beat Wall Street's expectations.
As of 1:15 p.m. EST, Magna's shares were up about 10.2% from Thursday's closing price.
So what
Magna reported fourth-quarter and full-year 2020 earnings before the U.S. markets opened on Friday, and they were good: Net income was up 68% from a tough year-ago quarter, to $738 million, and adjusted earnings per share ($2.83) and revenue ($10.12 billion) both beat Wall Street's estimates.
Like most of its peers and most of the global automakers, Magna had a challenging first half of 2020. The company had to idle and then restart over 300 factories worldwide amid the COVID-19 pandemic, and its own sales were hurt further as automakers cut their pre-pandemic production plans with sales uncertain.
Magna continued to make headway into the electric space in the fourth quarter, with a deal to build Fisker's Ocean electric SUV. Image source: Fisker.
The good news is that the second half of the year, and the fourth quarter in particular, were a lot better. Better-than-expected global auto production was the main reason that Magna beat expectations in the fourth quarter; a successful cost-reduction effort also helped.
Magna also had some nice wins in the quarter, including a deal to build electric-vehicle start-up Fisker's (FSR +0.00%) upcoming new SUV under contract. It also entered into a new joint venture with Korean giant LG Electronics that will manufacture a series of electric-vehicle components for global automakers.
That's why the stock is up today.
Now what
Magna's 2021 guidance was also good. It said that auto investors should expect:
- Revenue between $40 billion and $41.6 billion. (2020: $32.65 billion.)
- Adjusted EBIT margin between 7.1% and 7.5%. (2020: 5.1%.)
- Net income between $2.1 billion and $2.3 billion. (2020: $757 million.)
- Capital spending of about $1.6 billion. (2020: $1.1 billion.)
("Adjusted EBIT" is earnings before interest and tax, or EBIT, "adjusted" to exclude one-time items.)
