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Impressive Quarter for Lear

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Lear Corp. (LEA - Free Report) posted a 17.5% rise in adjusted earnings per share to $1.48 in the fourth quarter of 2012 from $1.26 in the corresponding quarter last year. Profits in the quarter beat the Zacks Consensus Estimate by a dime. In absolute terms, profits went up 10.4% to $144.6 million from $131.0 million in the year-ago quarter.

Revenues increased 6% to $3.7 million in the reported quarter, surpassing the Zacks Consensus Estimate of $3.5 million. Global industry production increased 2% year over year, with a 10% hike in North America and 4% rise in China. However, production in Europe decreased 8%.

Segment Results

Revenues from the Seating segment went up 3% to $2.8 billion, driven by benefits from the acquisition of Guilford and addition of new business, which was partially offset by the adverse impact of foreign currency translation and lower production from Europe.

Adjusted earnings declined to $162.8 million or 5.9% of sales in the quarter. The year-over-year fall in earnings was due to lower production from Europe, increased launch costs in South America and higher program development costs for the new business.

Revenues from Electrical Power Management Systems segment rose 14% to $958.6 million. Addition of new businesses had a favorable impact on revenues, partially offset by the negative impact of foreign exchange.

Adjusted earnings went up to $80.5 million or 8.4% of sales in the quarter, driven by increase in sales and productivity, which was partially offset by increased product and facility launch costs, and program development costs.

Share Repurchase

Lear repurchased 1.2 million shares for $50 million in the quarter. During 2012, the company has repurchased 5.4 million shares for $223 million. Since the inception of the share repurchase program, the company has repurchased 11.5 million shares for $502 million.

In Jan 2013, the company has authorized an additional $800 million for repurchase under the existing share repurchase program and extended the authorization till Jan 10, 2016. With this, the company had approximately $1.0 billion worth of shares remaining under its share repurchase program at the end of the quarter.

Financial Details

Lear had cash and cash equivalents of $1.4 billion as of Dec 31, 2012, declining from $1.8 billion as of Dec 31, 2011. Long-term debt amounted to $626.3 million as of Dec 31, 2012 compared with $695.4 million as of Dec 31, 2011.

For full year 2012, cash flow from operating activities amounted to $369.1 million, up from $273.8 million in 2011. Capital expenditure amounted to $150.0 million compared with $78.3 million in 2011. The company had free cash flow of $219.1 million in 2012 compared with $195.5 million in 2011.

Fiscal 2012 Results

Lear reported 2012 adjusted earnings per share of $5.49, up 2.8% from $5.34 a year ago. Reported earnings increased more than doubled to $12.85 per share from $5.08 in 2011. Revenues increased 2.8% to $14.6 billion from $14.2 billion in 2011.


In 2013, Lear anticipates revenues between $15.0 and $15.5 billion, with operating earnings in the range of $725.0–$775.0 million. Adjusted net income is expected between $420.0 million and $455.0 million for the year. Free cash flow is estimated to be $275.0 million, which is lower than 2012 due to higher taxes and interest expenses. Capital spending is expected to be $450.0 million.

Our Take

Lear Corporation designs, manufactures, assembles, and supplies automotive seat systems, electrical distribution systems, and related components primarily to automotive original equipment manufacturers. The company sells its products chiefly in North America, South America, Europe, and Asia. The company retains a Zacks Rank #3 (Hold).

Currently, Commercial Vehicle Group Inc. (CVGI - Free Report) , Oshkosh Corporation (OSK - Free Report) and Strattec Security with Zacks Rank #1 (Strong Buy) are performing well in the same industry where Lear operates.

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