Magna International's (MGA) 2025 guidance was affected by foreign exchange, original equipment manufacturer mix, and a contract ending at its Complete Vehicles segment, however, the company could unlock shareholder value by selling its Seating and/or CV businesses despite these challenges, RBC Capital Markets said in a note Friday.

Analysts said that during the Q4 conference call, the company mentioned that $3 billion of 2025 revenue headwinds are coming from two main areas: $2 billion from foreign exchange, mainly due to a weaker Euro, and lower CV sales, and $1 billion from original equipment manufacturer mix challenges. For CV, the company expects the Jaguar Land Rover program to end in 2025, with a 20% year-over-year revenue decline and a 36% drop in earnings before interest and taxes, or EBIT. In the Seating segment, management is forecasting a 6% revenue decline and a 19% drop in EBIT, partly due to higher input costs, including labor.

The analysts said Magna is likely to sell off businesses that don't align with its long-term strategy, as the company has done before - such as selling its interiors division in 2015. The analysts also said they could see Magna selling off its Seating and/or CV segments. The Seating division could be acquired by a larger competitor that could realize synergies and improve margins. CV could be sold to a Chinese original equipment manufacturer looking to expand production in Europe while utilizing local labor.

The analysts said they are using the midpoint of Magna's 2025 guidance in their model. This leads to an estimated 2025 earnings before interest, taxes, depreciation, and amortization of $3.70 billion, down from the previous estimate of $3.93 billion.

RBC Capital cut their price target to $51 from $52 while maintaining an outperform rating on the stock.

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