(Corrects paragraph 12 to show comparable earnings to analysts’ forecasts)
* Stock drops nearly 13 pct on TSX
* Forecasts flat 5 pct margin in 2011
* Q4 EPS $0.88 vs Reuters I/B/E/S forecast $0.94 (In U.S. dollars unless noted)
OTTAWA, Feb 24 (Reuters) - Magna International Inc (MG.TO)MGA.N shares tumbled nearly 13 percent in opening trade on Thursday after the world’s No. 3 auto-parts maker’s quarterly earnings and 2011 margin forecast fell shy of expectations.
Magna said after markets on Wednesday that it expects a flat operating margin of 5 percent this year as it faces higher costs for raw materials such as steel and resin, the launch of 15 new plants, and losses from its electric car unit [ID:N18301743].
Shares dropped C$7.01 to C$47.96 on the Toronto Stock Exchange and shed $6.94 to $48.79 in New York on Thursday morning.
Magna repeated its full-year sales forecast, first made last month, of $25.6 billion to $27.1 billion, and boosted its fixed asset spending plan by about $100 million to $1 billion to $1.1 billion.
CIBC World Markets analyst Michael Willimse, who had expected a full-year margin of 6 percent, cut his stock price target to $65 from $68 and reduced his profit estimates for 2011.
Willimse said Magna’s costs are rising as it expands capacity in lower-cost geographies and as its E-Car unit prepares for Ford’s electric vehicle program launch in late 2011 or early 2012.
“Although costs at these divisions are expected to negatively impact 2011 results, these divisions are expected to generate significant growth or could potentially be spun-off (particularly the E-Car division),” he said in a note. “As a result, we believe investors should look past the near-term drag on earnings.”
Willimse nudged his 2012 earnings estimate slightly higher.
Canaccord Genuity analyst David Tyerman made slight cuts to his annual profit estimates for 2011 through 2013 and reduced his stock price target to $64 from $65.
“Magna looks positioned for better results beyond 2012 as margins should begin to improve, but relatively low 2011-2013 growth guidance provided in January 2011 and likely rising tax rates will probably limit earnings per share growth in the mid term,” he said in a note that maintained his “hold” rating on the stock.
Aurora, Ontario-based Magna reported net income of $216 million, or 88 cents a share, for the quarter ended Dec. 31.
On an adjusted basis, Magna earned 99 cents a share, which lagged analysts’ average earnings estimate of $1.02 a share, according to Thomson Reuters I/B/E/S.
Sales were 22 percent higher at $6.6 billion as global vehicle production and sales continued to recover from a devastating auto sector downturn in 2009.
Magna hiked its dividend by 39 percent to 25 cents a share, the third consecutive quarter it has lifted its dividend since reinstating it last May.
Magna’s main business is the production of parts and components for major auto companies, but it also assembles complete vehicles in Europe.
$1=$0.98 Canadian Reporting by Susan Taylor; editing by Peter Galloway