The company designs and manufactures control arms, subframes, body structures, engine blocks, transmission cases and fluid management components, including brake lines and thermal systems.
Martinrea operates globally in North America, Europe and international markets and also produces suspension modules, structural structures and metal tanks.
The TSX stock is down 11% from its 52-week high, pushing its dividend yield to almost 2% through December 2025. Let’s see if you should own this Canadian dividend stock now.
Is this TSX stock a good buy?
Martinrea International posted solid third-quarter results despite disruption from a cybersecurity attack on its key customer, Jaguar Land Rover, and ongoing tariff negotiations.
The Canadian auto parts maker posted adjusted operating income of $65 million, while margins improved to 5.5%, up 20 basis points year-over-year. Without market-based equity compensation costs coupled with price gains, margins would have increased to 5.9%.
It generated free cash flow of $44.5 million in the third quarter (Q3), compared to $57 million in the same period last year, due to delayed receivables from the JLR cyber incident. These receivables have now been collected in the current quarter.
Martinrea ended the third quarter with net debt of $768 million, down $24 million. The debt to EBITDA ratio (earnings before interest, taxes, depreciation and amortization) is 1.5 times, which is not too high. Management maintained full-year revenue guidance in the range of $4.8 billion to $5.1 billion, with an average operating margin of 5.6%.
The North American business performed well as the region reported an adjusted operating margin of 6.9%. North America now accounts for more than three-quarters of manufacturing turnover, putting Martinrea in an advantageous position as production shifts back to the continent.
The company recently acquired Lyseon North America, a distressed bus parts manufacturer in Oklahoma, for a small price. This deal strengthens ties with International Truck while expanding its U.S. footprint to more than double the size of its Canadian operations.
Supply chain disruptions from the Novelis aluminum fire and Nexperia’s semiconductor shortage created headwinds, especially to fourth-quarter expectations. The drop in electric vehicle volumes also weighed on results as demand slowed after the expiration of US tax breaks. Some EV programs saw volume declines of more than 80% between quarters.
Martinrea expects operating margins to increase in 2026. The company also secured $30 million in new business awards and $1 billion in program expansions from existing customers in the third quarter. These expansions typically allow for better pricing to offset inflation while requiring less capital than new programs.
Martinrea continues to negotiate rate reductions with customers and expects to recover the vast majority of exposure by the end of 2025. The company also sees significant opportunity in resettling trends as Original Equipment Manufacturers (OEMs) look to shift production to North America amid changing trade dynamics.
Is TSX stock undervalued?
Analysts tracking Martinrea predict adjusted earnings will rise from $1.93 per share in 2025 to $2.49 per share in 2027. During this period, free cash flow is expected to improve from $123.6 million to $154 million.
Given an annual dividend payout of $0.20 per share, Martinrea’s dividend cost is approximately $13 million, suggesting a payout ratio of less than 10%.
If the TSX dividend stock has a price of six times FCF, which is reasonable, it could rise almost 24% over the next twelve months.
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