Why Did We Reduce Our Price Estimate For Lear To $153?

August 2nd, 2019 by Trefis Team
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Downside
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Trefis
LEA: Lear logo
LEA
Lear

Trefis decreased its stock price estimate for Lear Corporation (NYSE: LEA) from $173 per share to $153 per share in July 2019, as the company is continuously impacted by the challenging macroeconomic and industry environment. Due to the slowdown in the auto sector, in Q2 2019, global vehicle production was down more than 7% compared to last year, with China down 17% and Europe down 7%. Lear Corporation has seen its Total Revenue fall  by 10% y-o-y for the first 2 quarters of 2019 as the company is continuously impacted by the industry environment. Slower vehicle production is expected to continue, which will adversely impact Lear Corporation’s Revenue and, in turn, its earnings.

For detailed analysis please view our interactive dashboard analysis on What’s Driving Our $153 Price Estimate For Lear Corporation? In addition, here is more Consumer Discretionary data.

Revenue expected to fall amid Negative Economic conditions

  • Lear Corporation’s Total revenue has increased at a steady pace from $18.6 billion in 2016 to $21.1 billion in 2018. Trefis estimates a fall in the same to $20.9 billion in 2019.
  • Seating segment revenue has contributed the highest to Lear and has increased at a steady pace from $14.4 billion in 2016 to $16 billion in 2018. Trefis estimates a fall in the same to $15.6 billion in 2019.
  • E-system revenue has increased at a steady pace from $4.2 billion in 2016 to $5.1 billion in 2018. Trefis estimates a fall in the same to $5.2 billion in 2019.
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Estimating Net Income and EPS:

  • EBITDA margins have remained around the same number and so has the Net Income margin, meaning that Total expenses move very much in line with the revenue. Net Income is expected to remain nearly flat at $1.2 billion in 2019.
  • Meanwhile, EPS has shown a steady improvement with the continuous increase in Net Income and share buyback. We expect EPS to fall to around $17.89 for 2019.

 

Estimating Share Price:

  • Using the EPS forecast of $17.89 from above, and a implied P/E multiple of 8.6, Trefis estimates Lear Corporation Valuation to be $153.

 

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