As you might know, Magna International Inc. (TSE:MG) recently reported its quarterly numbers. Things were not great overall, with a surprise loss of US$0.75 per share on revenues of US$9.3b, even though analysts had been expecting a profit. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings consensus estimates to see what could be in store for next year.
Following last week’s earnings report, Magna International’s 15 analysts are forecasting 2020 revenues to be US$40b, approximately in line with the last 12 months. Earnings per share are expected to bounce 22% to US$6.78. Yet prior to the latest earnings, analysts had been forecasting revenues of US$40b and earnings per share (EPS) of US$6.72 in 2020. So it’s pretty clear that, although analysts have updated their estimates, there’s been no major change in expectations for the business following the latest results.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$60.59. That’s not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Magna International, with the most bullish analyst valuing it at US$62.03 and the most bearish at US$59.14 per share. The narrow spread of estimates could suggest that the business’ future is relatively easy to value, or that analysts have a clear view on its prospects.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 0.2% a significant reduction from annual growth of 4.7% over the last five years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 4.7% next year. It’s pretty clear that Magna International’s revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The most obvious conclusion from these results is that there’s been no major change in the business’ prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that Magna International’s revenues are expected to perform worse than the wider market. The consensus price target held steady at US$60.59, with the latest estimates not enough to have an impact on analysts’ estimated valuations.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Magna International going out to 2021, and you can see them free on our platform here..
You can also view our analysis of Magna International’s balance sheet, and whether we think Magna International is carrying too much debt, for free on our platform here.
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