How is Lear Corporation Likely To Grow In The Next 2 Years?

by Trefis Team
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Lear Corporation
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Lear Corporation, (NYSE: LEA), a leading supplier of automotive seating and electrical systems globally,  has had a strong start to 2018. Lear’s stock price has gained close to 16% since the beginning of the year and we expect the company to gain further momentum given its strong presence in the seating segment and the global shift towards energy efficient and connected vehicles. We expect Lear’s top line to grow at a CAGR of 8% over the next two years.

Lear backed the second position (based on revenue) in the seat systems assembly market globally in 2017 which was estimated at $65 billion by the company. The company’s recent acquisition of Grupo Antolin’s automotive seating business is expected to further boost the company’s growth prospects in the seating segment in the upcoming years as Antolin posses a strong market presence in Europe. Lear’s 2018 first quarter seating sales increased by 12% year-on-year (y-o-y) and the company attributed a large proportion of this growth to its recent acquisition. Additionally, a shift in consumer preference towards sports utility vehicles (SUVs) and crossovers are expected to further aid Lear’s top line as bigger cars such as SUVs and crossovers command premium content per vehicle (premium/ additional seating and more advanced electric content) leading to higher revenue for Lear.  Lear’s content per SUV is estimated at $1,000 as against the $700 average content per vehicle. 

Furthermore, Lear’s E-Systems segment is also expected to experience a substantial growth rate over the next two years driven by a changing global trend towards energy efficient and autonomous vehicles.  The company expects the electrical content growth rate in vehicles to be higher than the overall industry growth rate by almost 5%, which would require more complex vehicle electrical architectures to cater to this growth. The company has been gearing up its E-systems operations to accommodate this growth and the company’s recent announcement to acquire EXO Technologies coupled with the additional advanced technology obtained through its Grupo Antolin’s acquisition will enable Lear to remain at the top of its game.

Lear in 2018 expects 145 new launches in its seating segment and 160 launches in its E-system segment which would favorably enhance the company’s results. China is expected to remain a major growth driver for both of the company’s segments with an expected sales growth rate of 10% y-o-y in 2018. Our estimates for Lear’s two years’ projected growth are elaborated in our interactive dashboard. You can make changes to our assumptions to arrive at your own revenue estimate for the company.

 

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