Three out of the last four quarters, Canadian auto parts maker Magna International
What analysts say:
- Buy, sell, or waffle? Nineteen analysts work to piece together Magna's numbers, ending up with three buy ratings and 16 holds.
- Revenue. Analysts expect to see sales slide 1.4% to $5.93 billion.
- Earnings. Profits are predicted to plunge 32% to $1.35 per share.
What management says:
Reporting its Q4 and full-year 2006 results back in February, Magna described a situation of rising sales but falling profits. Even as 2006 sales inched up 6% compared to 2005, profits fell off a cliff, with earnings per share down 19% year over year. There was good news to report as well, however. Specifically, with U.S. $1.6 billion in operating cash flow and only U.S. $793 million spent on capital expenditures, Magna's free cash flow totaled U.S. $803 million, about 52% higher than reported net income under GAAP.
Peering forward into fiscal 2007, Magna expects to see flat sales at best, and a decline of 5.4% at worst. Management did not provide guidance on either earnings or operating cash flow in its report, but it did confide that it expects to spend between $800 million and $850 million on capital expenditures.
What management does:
Needless to say, these kinds of results have not improved the trend of declining profitability that Magna evinced last year. After a relatively prosperous fiscal 2005, we've watched Magna's rolling gross, operating, and net margins all trend downwards for the last three quarters straight.
9/05 |
12/05 |
3/06 |
6/06 |
9/06 |
12/06 |
|
---|---|---|---|---|---|---|
Gross |
13.2% |
13.1% |
13.3% |
13.2% |
12.9% |
12.3% |
Operating |
5.2% |
4.8% |
4.9% |
4.6% |
4.2% |
3.5% |
Net |
3.2% |
2.8% |
2.9% |
2.7% |
2.5% |
2.2% |
One Fool says:
Key to the fiscal 2007 projections discussed above is the following caveat included in Magna's 2006 earnings report: "In our 2007 outlook we have assumed no significant acquisitions or divestitures." Yet as it turns out, Magna is, in fact, contemplating one very significant acquisition. The big news erupting at Magna was that on April 13, management confirmed their interest in buying Chrysler away from Teutonic-American conglomerate DaimlerChrysler
No kidding? With everyone from GM
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Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy.