Auto Parts Manufacturers Rebound as TSX Slumps

The S&P/TSX Index extended its slump on Tuesday, February 6, falling 0.34% in early afternoon trading. The TSX has now declined 5.6% in 2018 thus far, almost eliminating all of its 2017 gains. Utilities, telecom, real estate, and now even financials stocks have been pummeled by the rise in bond yields and the anxiety surrounding interest rate tightening.

Magna International Inc. (TSX:MG)(NYSE:MGA) stock has dropped 4.6% in 2018. However, on Tuesday the Aurora-based auto parts manufacturer rebounded and was up 3.45% in early afternoon trading. The company is set to release its 2017 fourth quarter and full-year results in the coming weeks. In the third quarter of 2017 Magna posted record sales of $9.5 billion and saw diluted earnings per share rise 5% to $1.36. The company also delivered a quarterly dividend of $0.35 per share representing a 2% dividend yield.

Linamar Corporation (TSX:LNR) is the second-largest automobile parts manufacturer in Canada. Its stock has dropped 3.9% in 2018. On Tuesday shares were up 2.95% in early afternoon trading. Linamar released its 2017 third quarter results in December 2017. Sales jumped 6.5% to $1.55 billion and net earnings before non-recurring items and foreign exchange impacts rose 9.2%. It also delivered a dividend of $0.12 per share with a modest 0.6% dividend yield.

Manufacturing activity surged in the last months of 2017, but ongoing NAFTA negotiations have continued to be a source of anxiety for this sector. Negotiations have appeared to improve in recent weeks, which could present a great buying opportunity for these stocks in the midst of an early 2018 drop in the TSX.