Magna International, Inc. (MGA) has reported a loss of $5 million or 5 cents per share (before special items) in the fourth quarter of 2009, in stark contrast to the Zacks Consensus Estimate of a profit of 78 cents per share.

However, the loss was narrow compared to $76 million or 68 cents in the year-ago quarter. This was attributable to increased vehicle sales driven by improved consumer confidence and various stimulus programs by the governments to churn auto sales.

Sales in the quarter rose 12% to $5.4 billion due to increases in North American, European and Rest of World production sales and complete vehicle assembly sales, partly offset by decreases in tooling, engineering and other sales.

Segment Performance

Revenue from the External Production Sales segment (which comprises three geographic regions – North America, Europe, and Rest of World or ROW) advanced 16% to $4.36 billion.

External production sales in North America inched up 1% to $2.42 billion, reflecting a 2% increase in North American vehicle production volumes. This was partially offset by a 1% decrease in North American average dollar content per vehicle.

External production sales in Europe swelled 35% to $1.7 billion, reflecting a 13% increase in European vehicle production volumes combined with a 20% increase in European average dollar content per vehicle. External production sales in ROW increased $118 million to $221 million during the quarter.

Sales in the Complete Vehicle Assembly segment escalated 7% to $512 million. However, volumes declined 6% to 16,000 units in the segment. The higher sales were attributable to an increase in U.S. dollar sales due to the strengthening of the Euro against the U.S. dollar, partially offset by the decrease in complete vehicle assembly volumes.

Sales in the Tooling, Engineering and Other segment slid 7% to $547 million.

Annual Results

For full year 2009, Magna International has posted a loss of $298 million or $2.67 per share (before special items), a big downfall from the profit of $384 million or $3.37 per share (before special items) in the previous year. The loss is wider than the Zacks Consensus Estimate of a loss of $1.86 per share.

The disappointing results were driven by declines in vehicle production in North America (32%) and Western Europe (19%), along with a 47% decline in Complete Vehicle Assembly sales and a 16% decline in Tooling, Engineering and Other sales.

Sales in the year dipped 27% to $17.4 billion due to decreases in External Production Sales in North America and Europe by 31% and 17%, respectively, as well as in Complete Vehicle Assembly sales and Tooling, Engineering and Other sales by 47% and 16%, respectively. This was partly offset by an increase of 31% in External Production Sales in the ROW.

Financial Position

Magna had cash and cash equivalents of $1.3 billion as of December 31, 2009, a decrease from $2.8 billion as of December 31, 2008. Long-term debt was $131 million as of December 31, 2009. The long-term debt-to-capitalization ratio is 2%.

In the year, Magna had a net cash flow of $527 million from operations, exactly halved from the year-ago level. Meanwhile, capital expenditures totaled $629 million, down from $739 million in the previous year.

Looking Ahead

For the full year 2010, Magna anticipates consolidated sales in the range of $19 billion – $20 billion, assuming light vehicle production volumes of 10.5 million units in North America and 11.4 million units in Europe.

Average dollar content per vehicle is expected to be between $895 and $925 in North America and between $510 and $535 in Europe. Sales in the Complete Vehicle Assembly segment are expected in the range of $1.5 billion–$1.8 billion.

Estimate Revisions Trend

Over the last 30 days, out of the 13 analysts covering the stock, only 2 analysts have upwardly revised estimates for full year 2010. In the absence of any upward or downward revision of estimate from a majority of analysts, our long-term recommendation on the stock remains “Neutral” (Zacks #3 Rank).

With respect to earnings surprises, the stock has performed inconsistently over the trailing four quarters. Consequently, the average earnings surprise was -64.17%. This implies that Magna has missed the Zacks Consensus Estimate by that magnitude over the last four quarters.

The current Zacks Consensus Estimates for the first quarter and full-year 2010 are profits of 68 cents and $3.11, respectively. The upside potential of these estimates, essentially a proxy for future earnings surprises, currently stands at 4.41% and 8.68%, respectively.

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