Lear (LEA) Q1 Earnings & Revenues Miss Estimates, Down Y/Y

Lear Corporation (NYSE:LEA) reported first-quarter 2019 adjusted earnings per share of $4 compared with $5.10 recorded in the prior-year quarter. Also, the bottom line missed the Zacks Consensus Estimate of $4.06. At the end of first-quarter 2019, adjusted net income was $253 million compared with $345 million recorded in the prior-year quarter.

During the reported quarter, revenues decreased 10% year over year to $5.2 billion, whereas the Zacks Consensus Estimate was pegged at $5.7 billion. Revenues were impacted 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 $378 million from $491 million in first-quarter 2018.

Segment Performances

In the reported quarter, net sales at the Seating segment were $3.9 billion compared with $4.3 billion in first-quarter 2018. The adjusted margin was 7.6% compared with 8.3% in the prior-year quarter.

Net sales at the E-Systems segment was $1.2 billion compared with $1.4 billion generated in the year-ago quarter. Additionally, adjusted margin was 11.3% compared with 14.1% in first-quarter 2018.

Financials

Lear had $1.2 billion of cash and cash equivalents as of Mar 30, 2019, down from $1.5 billion recorded on Dec 31, 2018. The company had long-term debt of $1.94 billion as of Mar 30, 2019, almost unchanged from the figure as of Dec 31, 2018.

At the end of first-quarter 2019, Lear’s net operating cash inflow was $51.6 million in comparison with $236.8 million as of Mar 31, 2018. During the period, its capital expenditure was $122.8 million, marking a decrease from $162.8 million recorded in the prior-year quarter.

Capital Deployment

During the reported quarter, Lear repurchased 804,270 shares for $118 million. As of the end of the fourth quarter, the company had remaining share repurchase authorization of $1.47 billion.

2019 Outlook

Lear reiterated its 2019 guidance. The company 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). A few better-ranked stocks in the broader auto sector are Geely Automobile Holdings Ltd. (OTC:GELYY) , PACCAR Inc. (NASDAQ:PCAR) and Fox Factory Holding Corp. (NASDAQ:FOXF) .

While Geely currently sports a Zacks Rank #1 (Strong Buy), PACCAR and Fox Factory carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Geely Automobile has an expected long-term growth rate of 7%. Share price of the company has increased 25.6% in the past three months.

PACCAR has an expected long-term growth rate of 8.4%. Over the past three months, shares of the company have gained 9.6%.

Fox Factory has an expected long-term growth rate of 5%. Shares of the company have gained 31.7% in the past three months.

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