Bull Of The Day: Lear Corporation

The auto parts industry continues to benefit from surging auto sales, which are currently running at a decade high, thanks to still low gas prices and easily available credit. 

Lear Corporation (LEA – Snapshot Report) reported excellent quarterly results, sending estimates higher and the stock to a Zacks Rank #1 (Strong Buy).

Based in Southfield, MI, Lear is a leading global supplier of automotive seating and electrical systems. The company employs about 136,000 employees in its 240 locations worldwide.

Solid First Quarter Results and Improved Guidance

The company reported its Q1 results on April 27. Adjusted earnings for the quarter came in at $3.40 per share, up from $2.28 in the year-ago quarter. Earnings were also significantly ahead of the Zacks Consensus Estimate of $2.83. Revenues increased 8% year over year to $4.66 billion beating the Zacks Consensus Estimate of $4.64 billion.

For the current year, the management expects adjusted net income to be between $900 and $940 million, significantly up from the prior guidance of between $720 and $755 million. They expect sales to be between $18.5 and $19.0 billion. This outlook represents seventh consecutive year of higher sales and earnings.

Earlier this year, the company increased its dividend by 20% to $0.30 a share. They also continue to return capital to shareholders via buybacks. Last year, they returned $566 million to shareholders via repurchases and dividends.

Soaring Estimates

After excellent results and upgraded guidance, analysts have raised estimates for the company. Zacks Consensus Estimates for the current and the next year are now $12.99 per share and $13.90 per share respectively, up from $12.45 and $13.62, before the results.

The company has an excellent record of beating estimates and has missed only once in last five years, as you can see from the following chart:

The Bottom Line 
Global auto sales are expected to increase 2.7% this year. In this increasingly competitive market, auto makers continue to focus on improving their interior spaces in order to attract customers. Customers now demand additional comfort, convenience and safety features in their vehicles in addition to attractive external design.
 
Lear is well positioned in both its business segments—electrical and seating–with sales in both rising faster than the industry.