Magna International (NYSE:MGA) executives highlighted margin expansion, strong cash generation, and an active capital return plan while outlining a 2026 outlook that assumes a relatively flat light-vehicle production environment. On the company’s fourth-quarter and full-year 2025 results call, CEO Swamy Kotagiri said results reflected the “resilience of our business model” and continued traction from operational excellence initiatives, while CFO Phil Fracassa pointed to customer recoveries, disciplined capital spending, and cost actions as key drivers.
Fourth-quarter results: sales up, margins expanded
Magna reported fourth-quarter sales of $10.8 billion, up 2% year-over-year, despite a 1% decline in global light vehicle production. Adjusted EBIT margin expanded 100 basis points to 7.5%, and adjusted EBIT increased 18% to $814 million. Adjusted earnings per share rose 29% to $2.18.
On profitability, Fracassa attributed margin improvement largely to operational performance gains of about 130 basis points, including progress from operational excellence and cost-savings initiatives, engineering spend optimization, and benefits from prior restructuring actions, which more than offset higher labor and other input costs. He also noted a roughly 50 basis point benefit from tariffs in the quarter due to customer recoveries for costs incurred earlier in the year, while discrete items reduced margins by around 50 basis points and volume and other items reduced margins by about 30 basis points.
Full-year 2025: cash flow strength and leverage reduction
For full-year 2025, Magna reported sales of $42 billion, down slightly due to softer volumes in North America and Europe. Adjusted EBIT margin rose 20 basis points to 5.6%, and adjusted EBIT increased 2% to $2.4 billion despite lower sales and tariff headwinds. Adjusted EPS increased 6% to $5.73.
Cash generation was a central theme. Kotagiri said Magna generated $3.6 billion in operating cash flow and $1.9 billion in free cash flow for the year, supported by disciplined capital spending (3.1% of sales in 2025), fixed-cost improvements, and engineering optimization. The company ended 2025 with a rating agency-adjusted debt-to-EBITDA ratio just under 1.6x and $1.6 billion of cash on hand. Fracassa added that the company repaid a $300 million term loan in the fourth quarter and ended the year with total liquidity of $5.1 billion.
In the fourth quarter alone, operating cash flow was $2.0 billion, and free cash flow was $1.3 billion, which included more than $400 million in customer recoveries tied to investments for certain EV programs that were canceled or pushed out. Management noted these recoveries were a significant contributor to the quarter’s free cash flow.
Segment commentary: seating strength, power and vision headwinds, complete vehicles transition
Magna’s fourth-quarter segment results showed three of four segments posting higher sales year-over-year, with an 8% increase in seating. Complete vehicles sales declined 10%, which management said was largely expected due to lower engineering revenue and the end of Jaguar E-PACE and I-PACE production in Graz. Magna noted new launches with Chinese OEMs XPENG and GAC as a recent positive for the complete vehicles business and described them as a growth opportunity going forward.
On margins, body exteriors and structures and seating posted strong year-over-year improvements. Fracassa noted seating margins benefited from a warranty pool reversal, though he said margins still would have been up more than 200 basis points without the reversal.
Power and vision margins were pressured by discrete items in the quarter, including a customer settlement for a product-related matter, along with unfavorable mix. Management said productivity and efficiency improvements and net tariff recoveries partially offset those headwinds. Executives emphasized that excluding discrete items, power and vision margins would have been up year-over-year and in line with expectations, and they expect “considerable margin expansion” in the segment in 2026.
2026 outlook: modest sales growth, margin expansion, and buybacks
For 2026, Magna guided to sales that are near flat to up 3.5% versus 2025, reflecting new and replacement program launches, new assembly business for XPENG and GAC in Graz, higher light vehicle production in Europe, and foreign exchange translation from a weaker U.S. dollar. Offsetting factors include expected lower production in North America and China and the end of certain programs, including the BMW Z4 and Toyota Supra assembled in Graz and the Ford Escape in Louisville (as Ford retools the plant for new programs slated to launch in 2027).
The company expects adjusted EBIT margins in a range of 6.0% to 6.6%, implying expansion of 40 to 100 basis points from 2025. Management cited operational excellence benefits, earnings on higher sales, lower costs in areas such as warranty and new facilities, and higher equity income as expected positives, offset by normal price concessions, higher launch costs, and less tooling contribution. Fracassa said EBIT in 2026 is expected to be back-half weighted, with the first half representing just over 40% of full-year EBIT, and first-quarter EBIT expected to be lower than the second quarter.
Magna also introduced a 2026 adjusted EPS outlook of $6.25 to $7.25, based on assumptions that include approximately $180 million of interest expense and a 23% adjusted tax rate. Free cash flow is expected to be $1.6 billion to $1.8 billion, with capital expenditures guided to the “mid-3s” as a percentage of sales, still below 4%.
Capital returns remain a priority. The board approved a $0.01 increase in Magna’s quarterly dividend, marking the 16th consecutive year of dividend increases. Management said it plans to repurchase the remaining shares available under its normal course issuer bid, with approximately 22 million shares available as of the call. For purposes of its EPS guidance, Magna assumed an average diluted share count of about 270 million for 2026, reflecting planned repurchases.
Operational excellence, commercial recoveries, and key Q&A topics
Kotagiri said operational excellence initiatives contributed meaningfully to 2025 margin expansion and are expected to add another 35 to 40 basis points of margin benefit in 2026, bringing cumulative contribution to nearly 200 basis points over 2023–2026. He cited progress such as a unified digital architecture across about 80% of divisions, real-time performance dashboards, expanded material flow optimization supported by an internal fleet management platform, and scaling AI solutions for scheduling, quality control, and condition-based monitoring.
In Q&A, executives discussed several investor focus areas:
- Growth over market (excluding complete vehicles): Management reiterated its expectation for outgrowth of 1% to 4% excluding complete vehicles, driven by growth in body exteriors and structures and power and vision, while complete vehicles and seating are expected to decline due to program changes and roll-offs.
- Commercial items: Management said commercial recoveries were expected to be “relatively neutral” year-over-year on the EBIT line from 2025 to 2026, though it expects additional cash recoveries in 2026 that are not at the level seen in 2025.
- Seating business questions: Kotagiri said Magna “has not lost any incumbent Seating programs to competitors,” and described recent volume impacts as tied to customer direction changes and program transitions, including Ford Escape volume reduction for retooling.
- Power and vision warranty/recall matters: Management said a matter relating to a recall initiated in 2023 was resolved in the fourth quarter with a settlement payment to the customer. Separately, recalls announced in the third quarter remain an ongoing process with the customer and will continue into 2026.
- Input costs such as DRAM and commodities: Management said it had not seen disruption yet from DRAM issues, included a modest amount of unrecovered cost headwind in guidance, and noted it is coordinating with customers. On steel and aluminum, Kotagiri said the company typically mitigates commodity exposure through program structures with customers.
Closing the call, Kotagiri said the company’s confidence is rooted in “what’s within our control,” emphasizing continued operational excellence, margin expansion, strong free cash flow, and “significant returns of capital to shareholders” as key priorities for 2026.
About Magna International (NYSE:MGA)
Magna International Inc is a leading global automotive supplier specializing in the design, engineering, and manufacturing of vehicle systems, assemblies, modules, and components. Headquartered in Aurora, Ontario, the company partners with major original equipment manufacturers (OEMs) to develop technologies and solutions that enhance vehicle performance, safety, comfort, and fuel efficiency. Magna’s broad portfolio encompasses body exteriors and structures, powertrain systems, seating and interiors, roof systems, mirror systems, and advanced driver assistance systems (ADAS).
The company operates more than 350 manufacturing and assembly facilities and over 100 innovation centers across 27 countries, serving customers in North America, Europe, Asia, South America, and Africa.
