What Are The Key Sources Of Revenue For Lear?
Lear Corporation (NYSE: LEA), a Fortune 500 (#148) company, is one of the largest manufacturers and distributors of automotive interiors in the world. It supplies seating systems, including seat structures, seat foams and seat covers, and headrests to every major automaker in the world. With the rising demand for electrified and autonomous vehicles, Lear is well-poised to capitalize on this growth by investing in the developed as well as emerging markets.
We have a price estimate of $172 per share for the company. The details of the full-year outlook have been outlined in our interactive dashboard – Lear’s Total Revenue and EBITDA margins. You can make changes in our interactive platform to arrive at your own fair price estimate for the company.
LEA has enjoyed a strong first half of the year, mainly due to increased sales, new business additions, securing control of the business of certain affiliates, and the impact of the acquisition of Grupo Antolin’s seating business. However, the company expects the revenue growth in the second half to be sequentially weaker in comparison to the first half, due to the negative impact of seasonality, a major program changeover, and launch of new business. In anticipation of this drop in revenue, the stock has witnessed a sell-off recently and is currently trading 22% lower than its 52-week high. We expect the company to post $22.2 billion of revenues and a net income of $1.28 billion in 2018.
Seating Segment (77%) : Lear’s seating segment comprises the design, development, engineering, just in-time assembly, and delivery of complete seat systems. The company, the industry leader in this segment, had acquired Grupo Antolin’s seating business in 2017, which is expected to boost its seating segment revenues substantially in the coming years. However, the segment’s EBITDA margins have been declining over the last few quarters. Going forward, increased competition from local players in the emerging markets, coupled with price reductions from automakers, could impact Lear’s pricing power. We expect $17.1 million revenue from this segment in 2018.
E-Systems (23%) : Lear’s E-Systems segment consists of the design, development, engineering and manufacture of complete electrical distribution systems that route electrical signals and manage electrical power within the vehicle. The company is one of the four suppliers of complete electrical power management systems (EPMS) to automakers in the global markets. The connected , electrified, and autonomous vehicles market is expected to be a $53 billion opportunity by 2027 and the company is well-positioned to capture this growth. The company is already experiencing an increase in its new business due to these mega trends and this momentum is likely to grow in the coming years. We expect $4.9 billion revenues from this segment in 2018.
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