S&P Global Ratings on Thursday changed its outlook for Magna International Inc. to stable from negative and left intact the company’s 'A-' long-term issuer credit rating as well as the 'A-' issue-level rating on its unsecured debt. The ratings agency said the decision was driven by a combination of margin expansion, stronger cash flow generation and debt reduction that exceeded its earlier expectations.
S&P Global said it expects Magna to sustain adjusted debt to EBITDA below 1.5x and to keep adjusted free operating cash flow to debt above 30% over the coming years. The agency noted that Magna’s gross leverage was 1.5x as of March 31, 2026, and that modest deleveraging should continue as the company’s EBITDA is projected to grow in the range of 2% to 5% annually.
The ratings firm projects Magna will lift its adjusted EBITDA margin to approximately 11% over the next couple of years, up from 10.2% in 2025. That margin trajectory reflects an improvement of about 170 basis points versus 2023. S&P attributed the margin gains to organic expansion in higher-margin business segments, operational excellence initiatives, lower net engineering expenditures and a reduction in restructuring costs.
On cash flow, S&P Global expects Magna to generate free operating cash flow of roughly $1.8 billion to $1.9 billion annually over the next few years, equivalent to about 30% to 33% of adjusted debt. Those projections are based on assumptions that capital expenditures will remain in the 3.8% to 4.0% of revenue range and that there will be no further commercial battery electric vehicle recoveries this year after Magna received in excess of $450 million in such recoveries during the first quarter of 2026.
Following a period of limited repurchases, the ratings agency also anticipates Magna will increase its share buybacks to between $1.0 billion and $1.3 billion per year through 2028. S&P reiterated Magna’s position as the largest tier-1 automotive supplier in North America and the third largest globally, noting the company’s exposure to electrification, autonomous driving and connectivity.
Context and implications
While S&P reaffirmed the 'A-' ratings, the move to a stable outlook signals the agency’s increased confidence in Magna’s ability to sustain improved margins and convert earnings into free cash flow that supports faster debt paydown and the resumption of larger share repurchases. The projection of steady EBITDA growth and controlled capital spending underpins the ratings view that leverage will remain below the 1.5x threshold cited by the agency.
However, the agency’s forecasts incorporate specific assumptions about capital spending, recovery payments related to commercial battery electric vehicles and annual EBITDA growth rates, which it flagged as the basis for its projections.