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Lear (LEA) Surpasses Earnings Estimates in Q4, Stock Rallies
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Shares of Lear Corporation (LEA - Free Report) gained approximately 6.6% in a day’s trading, following its fourth-quarter 2018 earnings release. During the quarter under review, the company reported adjusted earnings per share of $4.05 compared with $4.38 recorded in the prior-year quarter. The bottom line surpassed the Zacks Consensus Estimate of $3.96. At the end of fourth-quarter 2018, adjusted net income was $261.3 million compared with $300.4 million recorded in the prior-year quarter.
During the reported quarter, revenues decreased 8% year over year to $4.94 billion. The Zacks Consensus Estimate was $4.98 billion. The slump is due to 5% fall in global vehicle production, which consists of 15% decline in China, owing to tough economic conditions.
Moreover, the company’s core operating earnings slumped $8 million year over year to $389 million in the reported quarter. In fourth-quarter 2017, the figure was $441 million.
Lear Corporation Price, Consensus and EPS Surprise
In 2018, Lear reported adjusted net income of $1.21 billion or $18.22 per share, up from $1.18 billion or $17 per share in the previous year.
Revenues for the year went up 3% year over year to $21.1 billion.
Segment Performances
In the reported quarter, net sales at the Seating segment were $3.7 billion compared with $4.1 billion in fourth-quarter 2017. The adjusted margin was 8% compared with 8.1% in the prior-year quarter.
Net sales at the E-Systems segment was $1.2 billion compared with $1.3 billion generated in the year-ago quarter. Additionally, adjusted margin was 11.3% compared with 14.3% in fourth-quarter 2017.
Financials
Lear had $1.5 billion of cash and cash equivalents as of Dec 31, 2018, almost in line with the figure recorded on Dec 31, 2017. The company had long-term debt of $12.9 billion as of Dec 31, 2018, compared with $9 billion as of Dec 31, 2017.
At the end of fourth-quarter 2018, Lear’s net operating cash inflow was $758 million in comparison with $598 million on Dec 31, 2017. During the period, its capital expenditure was $184 million, marking an increase from $164 million recorded in the prior-year quarter. The company’s free cash flow was $574 million, marking an increase from $435 million recorded in the same quarter of 2017.
Capital Deployment
During the reported quarter, Lear repurchased 1.6 million shares for $215 million. As of the end of the fourth quarter, the company had remaining share repurchase authorization of $800 million.
2019 Outlook
Lear currently expects net sales of $20.9-$21.7 billion and adjusted net income of $1.08-$1.17 billion. Further, it projects capital spending of roughly $700 million compared with the last year’s capital expenditure of $677 million.
Dana has an expected long-term growth rate of 2.9%. Share price of the company has increased 30.5% in the past month.
Volvo has an expected long-term growth rate of 15%. Over the past month, shares of the company have gained 5.9%.
Genuine Parts has an expected long-term growth rate of 5%. Shares of the company have gained 0.8% in the past month.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?
Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.
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Lear (LEA) Surpasses Earnings Estimates in Q4, Stock Rallies
Shares of Lear Corporation (LEA - Free Report) gained approximately 6.6% in a day’s trading, following its fourth-quarter 2018 earnings release. During the quarter under review, the company reported adjusted earnings per share of $4.05 compared with $4.38 recorded in the prior-year quarter. The bottom line surpassed the Zacks Consensus Estimate of $3.96. At the end of fourth-quarter 2018, adjusted net income was $261.3 million compared with $300.4 million recorded in the prior-year quarter.
During the reported quarter, revenues decreased 8% year over year to $4.94 billion. The Zacks Consensus Estimate was $4.98 billion. The slump is due to 5% fall in global vehicle production, which consists of 15% decline in China, owing to tough economic conditions.
Moreover, the company’s core operating earnings slumped $8 million year over year to $389 million in the reported quarter. In fourth-quarter 2017, the figure was $441 million.
Lear Corporation Price, Consensus and EPS Surprise
Lear Corporation Price, Consensus and EPS Surprise | Lear Corporation Quote
2018 Results
In 2018, Lear reported adjusted net income of $1.21 billion or $18.22 per share, up from $1.18 billion or $17 per share in the previous year.
Revenues for the year went up 3% year over year to $21.1 billion.
Segment Performances
In the reported quarter, net sales at the Seating segment were $3.7 billion compared with $4.1 billion in fourth-quarter 2017. The adjusted margin was 8% compared with 8.1% in the prior-year quarter.
Net sales at the E-Systems segment was $1.2 billion compared with $1.3 billion generated in the year-ago quarter. Additionally, adjusted margin was 11.3% compared with 14.3% in fourth-quarter 2017.
Financials
Lear had $1.5 billion of cash and cash equivalents as of Dec 31, 2018, almost in line with the figure recorded on Dec 31, 2017. The company had long-term debt of $12.9 billion as of Dec 31, 2018, compared with $9 billion as of Dec 31, 2017.
At the end of fourth-quarter 2018, Lear’s net operating cash inflow was $758 million in comparison with $598 million on Dec 31, 2017. During the period, its capital expenditure was $184 million, marking an increase from $164 million recorded in the prior-year quarter. The company’s free cash flow was $574 million, marking an increase from $435 million recorded in the same quarter of 2017.
Capital Deployment
During the reported quarter, Lear repurchased 1.6 million shares for $215 million. As of the end of the fourth quarter, the company had remaining share repurchase authorization of $800 million.
2019 Outlook
Lear currently expects net sales of $20.9-$21.7 billion and adjusted net income of $1.08-$1.17 billion. Further, it projects capital spending of roughly $700 million compared with the last year’s capital expenditure of $677 million.
Zacks Rank & Stocks to Consider
Lear currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader auto sector are Dana Incorporated (DAN - Free Report) , AB Volvo (VLVLY - Free Report) and Genuine Parts Company (GPC - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Dana has an expected long-term growth rate of 2.9%. Share price of the company has increased 30.5% in the past month.
Volvo has an expected long-term growth rate of 15%. Over the past month, shares of the company have gained 5.9%.
Genuine Parts has an expected long-term growth rate of 5%. Shares of the company have gained 0.8% in the past month.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?
Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.
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