What happened
When Magna International (MGA +0.86%) warned investors about its upcoming quarterly results on Jan. 24, the stock took a hit. But a stock market rally since then helped the shares regain that loss. That is, until the automotive industry supplier released those fourth-quarter and full-year 2022 results this morning. That sent shares tumbling today, with a drop of 16% as of 2:15 p.m. ET.
NYSE: MGA
Key Data Points
So what
2022 sales of $37.8 billion were in line with the guidance from two weeks ago as was the lowered level of profitability. Magna had said its adjusted earnings before interest and taxes (EBIT) margin would be below the 4.8% to 5% range projected in its November 2022 outlook. Magna reported that metric to be under 4.4% for 2022.
But the problem investors had with the results was the outlook for 2023 and beyond. Magna said costs will continue to run high, with CFO Patrick McCann saying on the conference call for investors, "We expect continued input cost pressures in 2023." McCann added that the company expects its EBIT margin to be between 4.1% and 5.1% in 2023 when analysts expected 5.6%.
Now what
The company noted the struggles experienced by the overall automotive industry in 2022, including inflation and geopolitical issues impacting supply chains and production schedules. Magna CEO Swamy Kotagiri said the company would focus on improving underperforming operations, controlling costs, and attempting to recover higher input costs from customers in 2023.
But in the longer term, Magna still believes it will grow faster than the global light vehicle market, and sees sales rising as much as 9% in 2023 and to continue to increase through 2025.
Magna counts many large global automotive manufacturers as customers, but also will be building vehicles for electric vehicle start-up Fisker. The business will be cyclical along with the auto industry. But if Magna does control internal costs and recover inflated input costs from customers, the long-term outlook should still look good for investors. That could take a few more quarterly periods to hash out, though.
