What To Expect From Lear Corporation’s Q1 2018 Results

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LEA: Lear logo
LEA
Lear

Lear Corporation (NYSE: LEA) will release its Q1 results and conduct a conference call with analysts on April 26. We expect the company to continue and display strong results as it continues to benefit from a change in consumer preference in the U.S. for crossovers and SUVs and additionally from a global market shift towards electrification and connectivity. Revenue is expected to display a significant year-on-year (Y-o-Y) growth rate of 9% as per consensus mean estimates at $5.45 billion. Average consensus adj-EPS is expected to be $4.91, ~15% higher than the same period last year, benefiting from higher revenue and the company’s superior cost structure.

Higher Revenue Growth To Be Derived From Both Seating Segment & E-system Segment

The changing industry trends have led to a huge future opportunity for Lear Corporation. The transition to crossovers and SUVs, which will lead to a higher content per vehicle, and presents a significant growth opportunity for the company’s seating business. Bigger cars such as SUVs and crossovers command premium content per vehicle (premium/ additional seating and more advanced electric content) leading to higher revenues for Lear. Content per SUV is estimated at $1,000 as against the $700 average content per vehicle. This trend is likely to positively impact Lear Corporation’s revenues.

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Similarly, a global push towards electrification will continue to remain beneficial for the company over the long-term. Lear Corporation has recently announced the acquisition EXO Technologies, a developer of differentiated GPS technology. This acquisition is likely to strengthen the company’s E-Systems segment even further.

Margins May Remain Low With Increasing Focus On China

Lear has a leading cost structure in comparison to its peers, however, costs are expected to remain on a higher range in 2018 as the company continues to expand its reach and invest in China. Additionally, greater R&D expenses to support the company’s alternative energy vehicle and connectivity initiatives are also expected to add to additional costs. However, these additional investment expenses are not expected to have a significant impact on the company’s margins.

Overall the company is expected to display a strong performance throughout the year. The details of our analysis have been outlined in our interactive dashboard. You can make changes to our key assumptions in our interactive platform to arrive at your own fair price estimate for the company.

 

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