Magna and Linamar Feeling Effects of European Market

North America is not the only continent where auto companies are feeling pain. UBS Investment Research analyst Fadi Chamoun has slashed his earnings per share and price targets on Canada’s two largest auto suppliers because automakers in Europe are building fewer vehicles.

The analyst cut his fiscal 2009 and 2010 EPS forecast for Magna International Inc. (MGA) by 10% and 4.3% respectively, saying the company will be hit by a 3.4% decline in vehicle production in Western Europe and get hurt by unfavorable foreign exchange translation. He cut his 2008 EPS forecast for Magna by 1% to C$5.54.

Mr. Chamoun said:

We expect restructuring related write-downs to increase over the next twelve months, as the company continues to right-size its North American manufacturing footprint.

He rates Magna a “buy” with a new 12 month target of C$65, down from C$73 previously, and said that Magna’s earnings will be down 40% year-over-year in the second half of 2008

Lower vehicle volumes in Western Europe will also hurt Guelph, Ont.-based Linamar Corp. (LIMAF.PK), Mr. Chamoun said, as will a decline in demand for its aerial work platforms. He cut his fiscal 2008, 2009 and 2010 EPS estimates for Linamar by 2.2%, 11.2% and 8.5% respectively. He rates Linamar “neutral” with a new 12-month target of C$11.50, down from C$13.50.