Key Morningstar Metrics for Magna International
- Fair Value Estimate: C$88.00
- Morningstar Rating: ★★★★
- Morningstar Economic Moat Rating: None
- Morningstar Uncertainty Rating: High
What We Thought of Magna International’s Earnings
Magna International MG reported third-quarter adjusted diluted EPS of $1.33, up 3.9% year-over-year. The company announced a new share buyback program for about 9% of the diluted share count. It also raised 2025 revenue, equity income, and adjusted EBIT margin guidance.
Why it matters: Market sentiment is poor for the auto supplier space, due to uncertainty around US tariff policy and the Nexperia chip shortage. We don’t think management seems worried about Nexperia, and a guidance increase (along with further share buybacks through Nov. 6, 2026) is a good sign.
- Adjusted EBIT margin increased 10 basis points to 5.9%, with all segments except power improving. Unmitigated tariff damage was 35 basis points, but operational improvements and equity income growth offset the tariffs. The 2025 margin guidance at the midpoint is 10 basis points higher at 5.5%.
- Reported free cash flow more than tripled to $572 million on working capital and lower capital spending. With $1.3 billion in cash and a total liquidity of $4.7 billion, we think the company has ample reserves to withstand a downturn, should the Nexperia or Ford aluminum shortage hurt badly.
The bottom line: We are raising our fair value estimate for no-moat Magna to C$88 per share from C$82. This is driven by the time value of money, higher projected revenue, equity income over our five-year explicit forecast period, and a weaker Canadian dollar versus the US dollar.
- As long as the United States avoids a recession, we don’t see 2026 as a bad year for Magna. The complete assembly business also has new contracts from two Chinese automakers. These are the first Chinese customers for this business, and more could follow to avoid EU tariffs.
- The guidance increase came on higher expected North American and Chinese light vehicle production. Management did not mention its 2026 outlook which was given earlier this year either, so things look stable for now, despite uncertainty, and we think 2026 upside is possible.
