November 5, 2010 / 2:01 PM / 8 years ago

UPDATE 2-Magna shares surge on shareholder-friendly news

* Stock up 6.1 pct on the TSX

* Q3 EPS $2.06 vs analyst view $1.52; revenue up 27 pct

* Raises dividend by 20 percent

* Plans to buy back up to 3.3 percent of common shares (Updates share price to market close. In U.S. dollars unless noted)

By John McCrank

TORONTO, Nov 5 (Reuters) - Shares of Magna International (MG.TO) (MGA.N) jumped 6.1 percent on Friday, a day after the auto-parts maker made a bevy of investor-friendly announcements and released quarterly results that blew past analysts’ expectations.

Magna raised its 2010 revenue outlook, boosted its dividend by 20 percent, announced a two-for-one stock split, a share buy-back, and a review of its board of directors, in what one analyst on the company’s conference call called “one of the most shareholder-friendly press releases I’ve ever seen.”

The company said after the market closed on Thursday that the rebound in auto production and higher content per vehicle in North America and Europe helped it more than quadruple its earnings from a year earlier to $241 million, or $2.06 a share. Revenue rose 27 percent to $5.9 billion. [ID:nN04228491]

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

The Aurora, Ontario-based company said it now expects 2010 consolidated sales of $23.5 billion to $24 billion, up from its August outlook of $22 billion to $23 billion.

“In light of the concerted efforts being made to return value to shareholders, consistent execution, and strong earnings trajectory we believe the stage is set for a healthy re-rating in MGA’s shares,” Tasneem Azim, an analyst at UBS Investment Research said in a note to clients.

Azim raised his one-year share-price target for the company to $112 from $100.

Analyst David Tyerman of Canaccord Genuity raised his target for Magna to $116 from $107, while Michael Willemse of CIBC Capital Markets raised his target to $1.12 from $1.10.

Shares of Magna ended up C$6.11, or 6.1 percent, at C$99.33 on the Toronto Stock Exchange on Friday.


The company’s stock had already surged 85 percent this year before its latest quarterly results, helped by a resurgent auto market and the end of founder Frank Stronach’s reign as controlling shareholder.

Magna announced in May a plan to move to a single class of shares from a dual-class structure and its shares jumped.

Many investors cheered the proposal as it would eliminate Stronach’s controlling share block in the company he founded in the late 1950s in a Toronto garage.

Stronach’s dominant voting shares allowed him to try to take the company in directions that many shareholders disagreed with, and analysts said that kept potential investors away.

While some large institutional investors vented their outrage at the idea Stronach would receive more than $1 billion in cash, stock, and other benefits in return for loosening his grip on Magna, most voted in favor of the plan and it went ahead in August, sending the shares higher still.

The 78-year-old Stronach — a rags-to-riches tycoon who came to Canada from Austria at the age of 21 with a suitcase and $200 in his pocket — remains chairman of Magna and is the company’s largest individual shareholder.

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.

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

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