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Lear (LEA) Up 5.8% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Lear (LEA - Free Report) . Shares have added about 5.8% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Lear due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Lear Q2 Earnings & Revenues Down Y/Y Amid Coronavirus

Lear's second-quarter 2020 adjusted loss came in at $4.14 per share, narrower than the Zacks Consensus Estimate of loss of $4.98.

Higher-than-expected revenues in both of the company’s segments led to this narrower-than-expected loss. Notably, sales in the Seating and E-Systems segments totaled $1,755 million and $689.6 million, surpassing the Zacks Consensus Estimate of $1,325 million and $399 million, respectively. The company had recorded earnings of $3.78 per share in second-quarter 2019.

At the end of the second quarter, adjusted net loss was $248.6 million, as against the prior-year quarter’s net income of $235.8 million.

In the reported quarter, revenues plummeted 51% year over year to $2,445 million. This downside resulted from lower production amid the coronavirus pandemic and foreign-exchange rate fluctuations. The top-line figure, however, beat the Zacks Consensus Estimate of $2,136 million.

The company’s core operating loss was $248.3 million, as against the earnings of $351.6 million reported in second-quarter 2019.

Segment Performances

In the June-end quarter, sales in the Seating segment totaled $1,755 million, significantly down 54.3% year over year. Adjusted segmental loss came in at $102.1 million, as against the earnings of $314.5 million witnessed in the second quarter of 2019. However, the loss came in much narrower than the Zacks Consensus Estimate of a loss of $143 million. The segment recorded negative adjusted margins of 5.8% of sales.

Sales in the E-Systems segment summed $689.6 million, marking a 41% plunge, year over year, in the reported quarter. Adjusted segmental loss amounted to $91 million, as against the earnings of $93.9 million recorded in the year-ago quarter. This loss is, however, narrower than the consensus mark of a loss of $106 million. For the E-Systems segment, adjusted margin was a negative 13.2% of sales.

Financial Position

The company had $1,775.5 million of cash and cash equivalents as of Jul 4, 2020, compared with $1,487.7 million recorded as of Dec 31, 2019. It had a long-term debt of $2302.7 million as of Jul 4, 2020, compared with $2,293.7 million recorded as of Dec 31, 2019.

At the end of the April-June quarter, Lear’s net operating cash outflow was $524.5 million, as against the cash inflow of $404.3 million as of Jun 29, 2019. During the reported period, its capital expenditure amounted to $86.1 million, down from the $136.5 million witnessed in the prior-year quarter.

Lear has suspended the 2020 guidance as it expects the pandemic’s crippling impact to strain its operations in the days to come.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month. The consensus estimate has shifted -13.19% due to these changes.

VGM Scores

At this time, Lear has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Lear has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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