Shares of Magna International rose after the auto parts maker reported better-than-expected third-quarter results and raised its 2025 outlook, signalling stronger cost management and higher customer recoveries. The company’s new forecast points to improved profit margins through year-end.
BNN Bloomberg spoke with Tom Narayan, lead global autos equity analyst at RBC Capital Markets, who said Magna’s results confirm its recovery plan is working, with customer payments offsetting tariffs and stronger demand supporting production. He added that while chip supply tensions in Europe remain a risk, the company’s diversified business mix and U.S. exposure provide stability.
Key Takeaways
- Magna beat third-quarter earnings expectations and raised its 2025 profit outlook.
- Analysts say stronger cost recovery and customer payments boosted results.
- The company’s new forecast implies higher margins in the fourth quarter.
- Global auto demand remains strong, led by resilient U.S. sales.
- Chip supply and political tensions in Europe remain potential headwinds.
Read the full transcript below:
ANDREW: Shares in Magna International are trending higher after the company reported a third-quarter earnings beat and raised its forecast for 2025. This is a global auto parts supplier and one of Canada’s industrial flagships. Let’s get more from Tom Narayan, lead global autos equity analyst at RBC Capital Markets. Tom, always great to talk to you. Thanks very much indeed. What was important about this Magna release? Why do you think investors were pleased?
TOM: I think after the second quarter, Magna was saying, “Hey, our second half is going to be really strong. We’re going to get all these customer recoveries. Tariffs are going to be borne by our customers, and all those payments are going to be coming in during the second half of the year.” And what we learned from the third-quarter numbers is that’s what’s happening. I think there was a little uncertainty as to how strong that recovery would be, maybe some doubt, but it looks as though management was right. A lot of those payments are coming from their customers — the OEMs — who are covering a lot of the tariff costs. And to your point, yeah, they raised their 2025 guidance, even above where our numbers are. So that means all of us have to raise our numbers as well.
ANDREW: Just remind us — how global are they, and how tied to North America are they, even roughly?
TOM: They’re very global, very global. I would say probably 30 to 40 per cent North America, a lot in Europe, and they’re trying to grow into Asia, especially in China.
ANDREW: And starting off with North America, how are auto sales right now? Are they okay by historical standards?
TOM: Yeah, very strong. At the beginning of the year, people thought auto sales in the U.S. would come in around 15 million. Traditionally, it’s closer to 16 or 17 million, and it’s coming in at 16 million. Why is that? I think there was a large amount of pent-up demand. People just didn’t buy cars during the pandemic or in the years after because prices went so high. The demand is very strong, unemployment is very low, and so there’s still strength. A car isn’t really a discretionary purchase — if you need a car, you’re going to buy it. And the pain we’re seeing in the U.S. economy is more on the very low end, which is hurting things like McDonald’s, not really big-ticket items like cars, furniture or houses.
ANDREW: That’s interesting. Although people can scale down, can’t they — buy a smaller car?
TOM: Yeah, that’s true. That’s definitely one of the concerns in autos in the U.S. — do we see a trade-down or mix effect coming down that hurts margins? That’s a high-level concern, but we’re not too worried about it. We actually think the U.S. is the place to be in autos. You don’t have the threat of Chinese car companies coming in, and we think there’s going to be more relief on the tariff front, which really benefits U.S. players more than anyone else.
ANDREW: What about electric cars? How important are they to Magna? They and Linamar have made massive investments. Obviously, growth in sales, particularly in North America, hasn’t been as rapid as hoped.
TOM: Yeah, that’s a good point, and it caused a lot of gyrations during 2025 — some cancellations and the like. But in some ways, it actually benefits a supplier like Magna. They can pivot back toward internal combustion engines — their core competency — which they’ve always done well. Remember, Magna is a conglomerate of different products. They have a seating business, a complete vehicle business where they make cars in Europe, and a body and structures business that has nothing to do with powertrains. One of their segments is affected somewhat negatively by these EV gyrations, but for the most part, it’s a very diversified group that’s largely immune to powertrain shifts.
ANDREW: There have been problems reminiscent of COVID in chip supply for the auto industry. Is that likely to affect Magna?
TOM: Yeah, that’s definitely something we’re watching. It feels like it’s impacting the European OEMs more. We’ve heard Volkswagen talk about it, we heard Stellantis yesterday. Magna definitely has exposure to the European OEMs, and it could impact U.S. players as well. They did talk about it on the earnings call today. It’s something they’re monitoring, and they included some caution in their fourth-quarter guidance. Other suppliers are including more caution. So it’s definitely something we’re watching — it’s keeping us a little hesitant to get really constructive on the space and on the company. But as it stands now, it’s not as bad as what we saw during the pandemic with the semiconductor crisis. This is more of a political dispute. It’s not that we don’t have the chips — it’s more of a political issue that could be resolved, unlike what we saw during the pandemic.
ANDREW: And Tom, I think you have a hold on Magna right now. You think it’s a bit too early to be putting new money to work here?
TOM: Well, we’re definitely warming to the name, especially after today. One of our big thoughts was that two of their business segments — seating and complete vehicle — were challenged. What we learned today is the seating business is actually getting a lot healthier. And in complete vehicle, they won new contracts from Chinese companies trying to sell cars into Europe, which is where that segment is based. So we’re warming to the name. But one thing we had hoped for is that Magna might sell one of those businesses, as we’ve seen other suppliers do. This now makes that less likely — ironically, because those businesses are doing better, they’re more likely to keep them. But we’re warming to the name right now. There’s still a lot of uncertainty related to the chip issue we talked about. We want to see more proof points — not just this quarter or next, but next year. Then, yeah, we could definitely get more constructive.
ANDREW: Tom, thank you very much indeed. Have a great weekend. Tom Narayan, lead global autos equity analyst at RBC Capital Markets.
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This BNN Bloomberg summary and transcript of the Oct. 31, 2025 interview with Tom Narayan are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
