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Lear (LEA) Lags Q2 Earnings & Revenue Estimates, Down Y/Y

Zacks Equity Research

Lear Corporation LEA reported second-quarter 2019 adjusted earnings per share of $3.78, down from $4.95 recorded in the prior-year quarter. Also, the bottom line missed the Zacks Consensus Estimate of $3.82. At the end of second-quarter 2019, adjusted net income was $236 million compared with $330 million in the prior-year quarter.

During the reported quarter, revenues declined 10% year over year to $5 billion. Also, the Zacks Consensus Estimate was pegged at $5.03 billion. The downside was caused by lower production on key Lear platforms, which were partly offset by the addition of new business.

Moreover, the company’s core operating earnings declined to $352 million from $471 million in second-quarter 2018.

Segment Performances

In the reported quarter, margins and adjusted margins in the Seating segment were 7.4% and 8.2% of sales, respectively.

In the E-Systems segment, margins and adjusted margins were 7.3% and 8% of sales, respectively.

Lear Corporation Price, Consensus and EPS Surprise

 

Lear Corporation Price, Consensus and EPS Surprise

Lear Corporation price-consensus-eps-surprise-chart | Lear Corporation Quote

 

Financials

Lear had $1.27 billion of cash and cash equivalents as of Jun 30, 2019 compared with $1.49 billion recorded on Dec 31, 2018. The company had long-term debt of $2.30 billion as of Jun 30 compared with $1.94 billion recorded as of Dec 31, 2018.

At the end of the quarter under review, Lear’s net operating cash inflow was $404.3 million compared with $516.9 million as of Jun 30, 2018. During the period, its capital expenditure amounted to $136.5 million, down from $169.4 million recorded in the prior-year quarter.

Capital Deployment

During the reported quarter, Lear repurchased 1,182,976 shares for $162 million. At the end of the quarter, the company had remaining share repurchase authorization of $1.3 billion, which expires on December 31, 2021. The figure represents approximately 16% of the company’s total market capitalization at current market prices.

2019 Outlook

Lear reiterated its 2019 guidance. The company currently expects net sales in the range of $19.8-$20.3 billion and adjusted net income in the band of $885-$965 million. Further, it projects capital spending of roughly $650 million compared with the prior outlook of $700 million.

Zacks Rank & Stocks to Consider

Currently, Lear has a Zacks Rank #5 (Strong Sell).

Stocks worth considering in the auto space are Copart, Inc CPRT, CarMax, Inc KMX and Advance Auto Parts, Inc AAP. While Copart sports a Zacks Rank #1 (Strong Buy), CarMax and Advance Auto Parts carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Copart has an expected long-term growth rate of 20%. In the past year, shares of the company have rallied 41.4%.

CarMax has an expected long-term growth rate of 12.6%. In the past year, shares of the company have moved up 21.4%.

Advance Auto Parts has an expected long-term growth rate of 11.6%. In the past year, shares of the company have returned 8.4%.

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