KeyBanc Analyst Slashes Forecast for Magna

Magna International Inc. (MGA) has not taken enough restructuring action – even though it is halving its dividend - to adjust for lower levels of auto production, especially given its exposure to ailing U.S. Automakers General Motors (GM), Ford (F) and Chrysler and its concentration in light truck sales, according to KeyBanc Capital Markets analyst Brett Hoselton.

He said:

While Magna has a strong balance sheet, with $2.4-billion in cash and $685-million in debt, it was disappointing that it cut its dividend in half and, at the current stock price, is now yielding only 2%.

Mr. Hoselton has also reduced his earnings estimate for the company to $4.08 from $5.85 in 2008, while making a whopping cut in 2009 estimates, to $0.02 a share from $6.00. For 2010, he cut his estimates to $2.63 from $6.46, “driven primarily by deterioration in the outlook for global light vehicle production.”

The analyst has a hold rating on Magna shres, saying investors should focus on companies with revenue diversification, solid organic revenue growth, lower    exposure to Big 3 light truck production and manageable commodity costs.