Lear (NYSE:LEA) Q3 2020 Earnings Prep

in EARNINGS/INVESTING IDEAS by

Lear Corporation (NYSE:LEA) is scheduled to report Q3 earnings results on October 30, 2020.

The company is expected to report earnings of $3.06/share on revenue of $4.711 billion. The consensus earnings per share (EPS) of $3.06/share is based on a poll of 16 analysts and represents a decline in eps of −13.6% over the same quarter last year, when the company reported earnings of $3.54/share.

The revenue forecast of $4.711 billion based on a poll of 12 analysts implies a year-over-year (YoY) decline in revenue of −2.4%. Last year the company reported $4.825 billion in revenue for the quarter.

Expected to report EPS contraction of −13.6% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $4,711.09 $4,825.00 −2.4%
EPS $3.06 $3.54 −13.6%

Earnings Call Trends

Historically, management has exceeded analyst expectations 7 out of the last 8 tracked quarters, and missed expectations 1 quarters.

What are your expectations from Lear Corporation for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 -$4.54 -$4.14 −8.7% Missed
Q1, 2020 $1.30 $2.05 57.5% Beat
Q4, 2019 $2.25 $2.64 17.5% Beat
Q3, 2019 $3.17 $3.54 11.7% Beat
Q2, 2019 $3.74 $3.78 1.1% Beat
Q1, 2019 $4.12 $4 −2.9% Missed
Q4, 2018 $3.92 $4.05 3.2% Beat
Q3, 2018 $4.01 $4.09 2.1% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending July 4, 2020, the stock price reacted by increasing 3.1%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 4, 2020 $112.01 $115.50 3.1% Increase
May 8, 2020 $92.73 $101.37 9.3% Increase
January 28, 2020 $130.19 $126.12 −3.1% Decline
October 25, 2019 $121.47 $124.22 2.3% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.79, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.79 implies a 0.3% chance of earnings manipulation.

Fundamentals And Technical Analysis

Lear Corporation is currently trading at $131.02/share, down −2.6% for the day. The company is trading at approximately 91.3% of its 52-week high of $143.50/share. The company’s stock price is up 13.4% since the last earnings report and down −0.5% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 58.41 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:LEA Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 50.83 and a forward P/E multiple of 35.36.

Lear Corporation’s current share price also implies a price-to-book (P/B) multiple of 2.03. The following table summarizes some other key fundamental ratios:

Data as of October 27, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date July 4, 2020
Stock Price (Current) $131.02
P/E Ratio 50.8x
P/E Ratio (Fwd) 35.4x
PEG Ratio −0.6
Total Debt / Total Capital 31.8%
Levered Free Cash Flow -$13.6 million
EV / EBITDA 9.0x

Finbox

Lear Corporation is a mid-cap stock with a market capitalization of $7.854 billion and a total enterprise value of $10.136 billion. The company operates in the Consumer Discretionary sector and the Auto Components industry.

Lear Corporation designs, develops, engineers, manufactures, assembles, and supplies automotive seating, and electrical distribution systems and related components for automotive original equipment manufacturers in North America, Europe, Africa, Asia, South America, and internationally. Its Seating segment offers leather and fabric products, seat covers, recliner mechanisms, seat tracks and foams, seat structures and mechanisms, and headrests for automobiles and light trucks, compact cars, and sport utility vehicles. The company’s E-Systems segment offers electrical distribution systems that route electrical signals and networks, and manage electrical power within the vehicle for various powertrains, such as traditional internal combustion engine architectures, hybrid, plug-in hybrid, and battery electric architectures. This segment’s products comprise wire harnesses, terminals and connectors, and junction boxes; and electronic control modules, such as body control modules, smart junction boxes, gateway modules, wireless receiver and transmitter technology, lighting control modules, audio domain controllers, amplifiers, and communication modules. It also provides electrification products comprising charging systems that include onboard charging modules and cord set charging equipment; battery electronics, which comprise battery disconnect units, cell monitoring supervisory systems, and integrated total battery control modules; and other power management modules, including converter and inverter systems. In addition, this segment offers cybersecurity software; advanced vehicle positioning for automated and autonomous driving applications; roadside modules that communicate real-time traffic information; and cellular protocols for vehicle connectivity, as well as Xevo Journeyware, a platform for the cloud, vehicles, and mobile devices; and connectivity products. The company was founded in 1917 and is headquartered in Southfield, Michigan.

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