November 4, 2010 / 9:28 PM / 8 years ago

UPDATE 2-Magna profit soars, announces stock split

* Q3 EPS $2.06 vs analyst view $1.52

* Revenue up 27 percent at $5.9 billion

* Announces two-for-one stock split

* Plans to buy back up to 3.3 percent of common shares

* Raises dividend by 20 percent (Adds details, analyst comments, background. In U.S. dollars unless noted)

TORONTO, Nov 4 (Reuters) - Auto-parts maker Magna International (MG.TO) (MGA.N) reported quarterly earnings on Thursday that soundly beat analysts’ expectations as sales benefited from the rebound in North American auto production.

The company said it now expects 2010 consolidated sales of $23.5 billion to $24 billion, up from its outlook released at the end of the second quarter of $22 billion to $23 billion.

The Aurora, Ontario-based company said it earned $241 million, or $2.06 a share, in the third quarter, compared with $51 million, or 45 cents a share, in the year-earlier period.

Revenue rose 27 percent to $5.9 billion.

Analysts expected the company to earn $1.52 a share on revenue of $5.4 billion, according to Thomson Reuters I/B/E/S.

“We’re seeing these huge year over year changes in North American auto production volumes and that can cause results to miss consensus, because often analysts underestimate the power of operating leverage,” said Chicago-based Morningstar analyst David Whiston.

Some of the companies that Magna competes against include TRW Automotive Holdings Corp TRW.N, Johnson Controls (JCI.N), Lear Corp (LEA.N), American Axle (AXL.N), and BorgWarner Inc (BWA.N), all of which recently posted forecast-beating quarterly earnings.

David Tyerman, an analyst at Canaccord Genuity said the big upside surprise at Magna was helped by higher content per vehicle in both North America and Europe.

“Guidance looks strong, so (it’s) probably sustainable,” he added.

Average dollar content per vehicle rose 9 percent in North America and 8 percent in Europe from a year earlier. North American vehicle production was up 28 percent, while European vehicle production slipped 1 percent from a year ago.


Magna also announced a two-for-one stock split of the company’s outstanding common shares to be implemented by way of a stock dividend, payable on Nov. 24.

“It looks like it was a good quarter,” said CIBC World Markets analyst Michael Willemse.

He said he thought the stock split, which makes the shares more appealing to retail investors, was a good idea.

Magna released its results after the market close. Its shares, which ended up 3 percent at C$93.61 on the Toronto Stock Exchange on Thursday, have soared 85 percent so far this year.

The company’s common shares are expected to begin trading on a split basis in Toronto on Nov. 12 and on the New York Stock Exchange on Nov. 26.

If approved by regulators, shareholders will receive one additional common share for each common share held.

Shares of Magna surged in May when a plan was announced to move to a single class of shares from a dual-class structure, which would see founder Frank Stronach’s control of the company loosened substantially.

The deal was approved in August and the shares surged again, despite a controversial payout to Stronach of over $1 billion in cash, common stock and other benefits.

Analysts said that Stronach’s controlling stake in the company had allowed him to try to take Magna in directions that many shareholders disagreed with, keeping potential investors away.

Magna said on Thursday it plans to buy back up to 3.3 percent, or 4 million of its common shares — adjusted to 8 million on a split basis — in a normal course issuer bid.

It also raised its dividend by 20 percent to 18 cents per share. That equates to 36 cent per share on a pre-split basis. Last quarter it raised its dividend to 30 cents from 18 cents.

As well as producing parts and components for major auto companies, Magna also assembles vehicles in Europe. It said complete vehicle assembly sales were up 21 percent at $519 million, while complete vehicle assembly volumes rose 41 percent to about 21,000 units.

Operating profit in the quarter was $317 million compared with $81 million a year earlier.

$1=$1.00 Canadian Reporting by John McCrank; editing by Peter Galloway and Rob Wilson

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