Key Takeaways From Lear Corporation’s Q2 Results
Lear Corporation (NYSE: LEA) released its second-quarter results on 26th July and conducted a conference call with analysts the same day. The company had a robust Q2 but missed analyst earnings estimates by a marginal amount. Lear reported an EPS (Non-GAAP) of $4.95 per diluted share and a revenue of $5.6 billion, respectively up by 13% and 9% on a year-on-year (y-o-y) basis. The company’s superior revenue performance was led by its product mix improvement, whereas lower margins due to program changeovers and rising commodity costs weighed on the company’s overall performance.
Lear experienced strong revenue growth across both its business segments during the second quarter. Excluding a favorable currency impact, the company reported a 2% and 13% increase in its revenue from its Seating and E-Systems segments, respectively. The company broadly attributed the increase in sales to new business additions, securing control of certain affiliates, and the additional impact of the acquisition of Grupo Antolin’s seating business. However, the company expects revenue growth in the second half of the year to be sequentially weaker in comparison to its first half, reflecting seasonality impact coupled with a major program changeover, and launch of new business by the end of the year.
The company’s margins declined across both segments as previously anticipated by the company. The decline was primarily the result of incremental cost headwinds due to increased costs associated with program changeovers, accelerated new business coating activity, and higher commodity costs, mainly those associated with steel. However, a lower tax rate and reduced share count (due to buybacks) have enabled the company to maintain higher per-share earnings.
The company has maintained its full-year financial outlook and remains confident about the company’s future performance. We have kept our base case estimates for the company’s full-year 2018 performance unchanged based on its recent results. You can make changes to our key assumptions in our interactive dashboard:Q2’18: What To Expect From Lear Corporation In 2018, to arrive at your own fair price estimate for the company.
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