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Magna International (MGA) Crushes Estimates, Announces 2:1 Split, Stock Buyback, Increases Dividend by 20%

 November 05, 2010 02:10 PM

If Magna International (MGA) were involved in the 'cloud space' (even 10% of revenue, which now gives you the massive overvaluation) this sort of beat would have the stock up 20%+ on this sort of report.  Too bad you cannot build auto frames in the cloud.   Not much I can add here that I did not say the past week withTRW Automotive (TRW) and BorgWarner (BWA).

EPS estimate for the quarter was $1.52; the company came in at $2.06 - a beat of 5 cents.  This immediately takes full year estimates of $7.83 up to roughly $8.40.   Fourth quarter's estimates of $1.61 again looks silly.  Assuming they can do $2.00 next Q, we take the $8.40 for the year and raise it to $8.80.   Therefore I've just raised full year estimates up 13% or about a dollar.   At roughly $100, this gives a forward PE of 11.

Additionally, (a) a 2:1 split, (b) a stock buyback, and (c) dividend raised 20% to $0.36 presplit ($0.18 post split)  Raised guidance, yada, yada, yada.  Increased content in each auto to boot.  News like this would have Netflix up 30%, Magna snored through only a 4% gain in after hours.  "Oh, Canada..."

As stated yesterday, this group is strikingly similar to fertilizer stocks circa fall 2007 thru early 2008.  Highly levered operations (great on the upside, not so great on the downside), and analysts are completely missing the upside story via estimates.  This is allowing for big beat, after big beat.  But like the fertilizer stocks circa mid 2008 - eventually analysts will catch up and somewhere down the road a "miss" will come in, and crush the stocks... although these will never reach the 'momo' status of the fertilizer group back then.

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