S&P Global Upgrades Magna Outlook to Stable on Stronger Cash Flow, Debt Reduction

S&P Global Ratings has revised its outlook on automotive supplier Magna International Inc. (MGA) to stable from negative, signaling increased confidence in the company's financial health. The ratings agency on Thursday affirmed its 'A-' long-term issuer credit rating and the 'A-' rating on Magna's unsecured debt, pointing to stronger-than-expected cash flow generation, margin expansion, and debt reduction.

Improved Financial Metrics Drive Outlook

The outlook change reflects S&P's expectation that Magna will maintain robust credit metrics over the next several years. The agency's forecast includes:

• Adjusted debt to EBITDA remaining below 1.5x.
• Adjusted free operating cash flow (FOCF) to debt staying above 30%.

S&P noted that as of March 31, 2026, Magna's gross leverage stood at 1.5x. The agency anticipates modest deleveraging to continue, supported by projected annual EBITDA growth of 2%-5%.

Margin and Cash Flow Forecasts

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S&P projects Magna will expand its adjusted EBITDA margin to approximately 11% over the next two years, a significant increase from 10.2% in 2025 and a 170 basis point improvement compared to 2023. This growth is expected to be driven by organic expansion in higher-margin business segments, operational excellence initiatives, and reduced engineering and restructuring costs.

The ratings agency forecasts strong free operating cash flow generation of $1.8 billion to $1.9 billion annually for the next few years. This forecast assumes capital expenditures will be between 3.8% and 4.0% of revenue and does not factor in additional commercial battery electric vehicle (BEV) recoveries beyond the more than $450 million received in the first quarter of 2026.

Capital Allocation and Market Position

Following three years of limited buybacks, S&P expects Magna to increase its share repurchases to between $1.0 billion and $1.3 billion per year through 2028. The stable outlook provides the company with greater financial flexibility for its capital allocation strategy.

Magna International is the largest tier-1 automotive supplier in North America and the third-largest globally. Its strategic positioning gives it significant exposure to major industry trends, including vehicle electrification, autonomous driving, and connectivity.