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Lear (LEA) to Acquire Xevo to Expand Connectivity Offerings

Zacks Equity Research

Lear Corporation LEA has announced that it inked a definitive agreement to acquire Xevo Inc., the Seattle-based Tier-1 automotive software supplier. This acquisition is likely to combine e-commerce vehicle platform technology of Xevo with the Southfield, MI-based leading supplier of automotive seating and electrical systems, Lear’s proficiency in electronic systems. In other words, this is likely to broaden Lear’s connectivity offerings, with a leading-edge technology platform.

Presently, Xevo’s technology is available in more than 25 million vehicles located mainly in the United States. Moreover, there is considerable opportunity for expansion of the Xevo’s technology in North America, Europe and Asia.

Nevertheless, per the deal, all outstanding shares of Xevo will be acquired by Lear for $320 million. The transaction, which is scheduled to close in second-quarter 2019, is likely to be executed through debt financing.

Over the next year, Lear plans to launch a number of programs within Seating and E-Systems segments. Its developmental programs and partnerships along with production contracts are expected to drive financials in 2019. The Xevo acquisition will advance Lear’s leadership position in reshaping the global automotive industry. This will allow Lear to enhance capabilities in software, services and data analytics.

In the past six months, shares of Lear have outperformed the industry it belongs to. Its stock decreased 5.9% compared with the industry’s decline of 13.1%.




Zacks Rank and Stocks to Consider

Lear currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the auto space are Ferrari N.V. RACE, General Motors Company GM and Fox Factory Holding Corp. FOXF. While Ferrari currently sports a Zacks Rank #1 (Strong Buy), General Motors and Fox Factory carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ferrari has an expected long-term growth rate of 18.5%. Shares of the company have gained 33% over the past three months.

General Motors’ long-term growth rate is projected at 8.9%. Over the past three months, shares of the company have gained 13.4%.

Fox Factory has an expected long-term growth rate of 15.1%. Over the past three months, shares of the company have risen 21.8%.

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Fox Factory Holding Corp. (FOXF) : Free Stock Analysis Report
 
General Motors Company (GM) : Free Stock Analysis Report
 
Ferrari N.V. (RACE) : Free Stock Analysis Report
 
Lear Corporation (LEA) : Free Stock Analysis Report
 
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