Lear (LEA) Q2 Earnings Beat Estimates, Revenues Increase Y/Y

Lear Corporation LEA reported second-quarter 2022 adjusted earnings of $1.79 per share, plunging around 27% year over year from $2.45. The bottom line, however, surpassed the Zacks Consensus Estimate of $1.34 per share. Higher-than-expected sales and earnings from the Seating segment led to the upside.

In the reported quarter, revenues inched up 6.5% year over year to $5,071 million. The top line beat the Zacks Consensus Estimate of $5,001 million.

Lear Corporation Price, Consensus and EPS Surprise

Lear Corporation Price, Consensus and EPS Surprise

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

Segment Performance & Quarter Highlights

Sales for the Seating segment totaled $3,874.1 million in the reported quarter, reflecting a 7.4% increase from the year-ago quarter and surpassing the Zacks Consensus Estimate of $3,749 million. Adjusted segmental earnings came in at $233.4 million, declining 11% from a year ago. Nonetheless, the reported figure topped the consensus mark of $205 million. The segment recorded adjusted margins of 6% of sales, down from 7.3% in the previous-year quarter.

Sales in the E-Systems segment summed $1,196.9 million, up 3.9% year over year. The figure, however, lagged the consensus mark of $1,224 million. Adjusted segmental earnings amounted to $24.30 million, plummeting 40%. The metric lagged the consensus mark of $24.49 million. For the E-Systems segment, the adjusted margin was 2% of sales, down from 3.5% in the year-ago quarter.

In May, Lear announced that it entered into a definitive agreement to acquire IGB, a Germany-based supplier of automotive seat heating, ventilation, active cooling, steering wheel heating, seat sensors and electronic control modules. The acquisition, valued at €140 million, will expand Lear's product capabilities into active cooling and be in sync with existing offerings.

Performance by Region

Sales in the North America region increased 18.1% year over year to $2,193.5 million in the quarter and topped the consensus mark of $2,114 million.

Sales in the South America region increased nearly 21% year over year to $216.8 million in the quarter and topped the consensus mark of $182 million.

Sales in the Europe and Africa region increased 1% year over year to $1,744.7 million in the quarter and topped the consensus mark of $1,723 million.

Sales in the Asia region decreased 8.1% year over year to $916 million in the quarter and lagged the consensus mark of $991 million.

Financial Position

The company had $828 million of cash and cash equivalents at the quarter-end, a sharp fall from $1,401.7 million recorded a year ago. It had long-term debt of $2,595.2 in the quarter end, higher than a debt of $2,301.3 million in the year-ago quarter end.

At the second quarter-end, net cash provided by operating activities totaled $11.4 million, a steep fall from $260.1 million a year ago. In the reported period, its capital expenditure amounted to $172.2 million, increasing from $140 million. It registered a negative free cash flow of $160.8 million against a positive cash flow of $120.1 million in the previous-year quarter. Selling, general and administrative expenses remained almost flat at $171.2 million compared with $170.8 million a year ago.

During the quarter, it repurchased 380,220 shares of its common stock for a total of $50.2 million.  At the end of the quarter, Lear had a remaining share repurchase authorization of nearly $1.3 billion.

2022 Guidance

Lear revised its financial outlook for 2022. It now projects its full-year net sales in the band of $20.55-$21.05 billion instead of the previous range of $20.4-$21.2 billion. Core operating earnings are now envisioned in the band of $815-$915 million compared with the earlier range of $765-$965 million. Operating cash flow is now projected within $950-$1,075 million instead of $875-$1,125 million. Lear’s anticipated FCF has been changed to the band of $275-$375 million from $225-$425 million. Capital spending forecast is now within $675-$700 million from the earlier range of $650-$700 million. Adjusted EBITDA estimation has been changed to $1,405-$1,505 million from $1,365-$1,565 million.

Zacks Rank & Key Picks

LEA carries a Zacks Rank #3 (Hold), currently.

Better-ranked players in the auto space include Harley-Davidson HOG, sporting a Zacks Rank #1 (Strong Buy), and Genuine Parts Company GPC and PACCAR Inc. PCAR, each carrying a Zacks Rank #2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Harley-Davidson has an expected earnings growth rate of 6.9% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 6.9% upward in the past 30 days.

Harley-Davidson’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. HOG pulled off a trailing four-quarter earnings surprise of 49.52%, on average. The stock has declined 5.9% in the past year.

Genuine Parts has an expected earnings growth rate of 15% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 1.3% upward in the past 30 days.

Genuine Parts’ earnings beat the Zacks Consensus Estimate in all of the trailing four quarters. GPC pulled off a trailing four-quarter earnings surprise of 11.03%, on average. The stock has risen 20.7% over the past year.

PACCAR has an expected earnings growth rate of 45.3% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 7.4% in the past 30 days.

PACCAR’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. PCAR pulled off a trailing four-quarter earnings surprise of 7.44%, on average. The stock has risen 11.3% in the past year.

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