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Why Shares of Magna International Jumped in February

By Lou Whiteman - Updated Mar 8, 2021 at 9:43AM

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The company provided an optimistic outlook indicating it is on the right road.

What happened

Shares of Magna International (MGA -2.02%) hit the fast lane in February. The stock traded up 19% for the month, according to data provided by S&P Global Market Intelligence, as investors applauded the company's quarterly earnings report.

So what

Magna is a Canada-based auto supplier, and like most in the automotive industry the company had challenges in the early part of 2020. The pandemic forced the company to temporarily halt production at more than 300 factories worldwide, and led to reduced sales as automakers trimmed the number of cars rolling off the line.

Rendering of an electric car.

Image source: Getty Images.

But the company bounced back in the second half of 2020, finishing the year with a flourish. Magna mid-month reported fourth-quarter earnings of $2.83 per share on revenue of $10.57 billion, easily besting analyst expectations for $2.03 per share in earnings on sales of $10.12 billion.

Magna is also optimistic about the future. The company said it sees revenue in 2021 coming in between $30 billion and $41.6 billion, well ahead of the $38.45 billion consensus. By 2023 the company expects sales of between $43 billion and $45.5 billion, with margins growing from a predicted 7.1% to 7.5% in 2021 to between 8.1% and 8.6% in 2023.

The results led to at least three price target hikes by Wall Street analysts and propelled the company higher for the month.

Now what

Magna is a well-regarded auto parts supplier, but a lot of the excitement around the stock centers on the role it appears likely to play in the electrification of the industry. Magna has set itself up to be for automakers what Foxconn Technology is for Apple and other tech giants.

Magna has deals in place to build Jaguar's I-Pace electric car and a vehicle for Fisker under contracts, and has worked with others including Sony on potential vehicle designs. Though not as sexy as some of the electric vehicle start-up names, Magna arguably has positioned itself to be as big a beneficiary, if not bigger, of the EV trend than a lot of the start-ups.

Those interested in investing in the future of the automobile could do a lot worse than buying shares of Magna International.

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