LEAR (LEA) Q2 Earnings Beat, Sales Miss Estimates, ’21 View Down

Lear Corporation LEA reported second-quarter 2021 adjusted earnings of $2.45 per share, marginally surpassing the Zacks Consensus Estimate of $2.40. Higher-than-expected contribution from the E-Systems segment led to this outperformance. The reported earnings figure also turns around the loss of $4.14 per share witnessed in second-quarter 2020.

For the reported quarter, revenues surged 95% year over year to $4,760.7 million. The top line, however, lagged the Zacks Consensus Estimate of $4,803 million.

Lear Corporation Price, Consensus and EPS Surprise

Lear Corporation price-consensus-eps-surprise-chart | Lear Corporation Quote

Segmental Performance

Sales in the Seating segment totaled $3,608.2 million for second-quarter 2021, jumping from the year-ago quarter’s $1,754.9 million. However, the metric missed the Zacks Consensus Estimate of $3,682 million. Adjusted segmental earnings came in at $262.2 million, reversing the loss of $102.1 million posted in the second quarter of 2020. However, the metric trailed the Zacks Consensus Estimate of $269 million. The segment recorded adjusted margins of 7.3% of sales.

Sales in the E-Systems segment summed $1,152.5 million, up 67.1% year over year. The figure also topped the consensus mark of $1,129 million. Adjusted segmental earnings amounted to $40.5 million, as against the loss of $91 million reported in the year-ago quarter. The metric topped the Zacks Consensus Estimate of $39 million. For the E-Systems segment, adjusted margin was 3.5% of sales.

Financial Position

The company had $1,401.7 million of cash and cash equivalents as of Jul 3, 2021 compared with the $1,775.5 million recorded in the corresponding period of 2020. It had a long-term debt of $2,301.3 million as of Jul 3, 2021, compared with the $2,302.7 million recorded in the year-ago quarter.

At the end of the second quarter, net cash provided by operating activities totaled $260.1 million compared with the $524.5 million of cash used in the year-ago period. For the reported period, its capital expenditure amounted to $140 million, up from the prior-year quarter’s $86.1 million. Free cash flow (FCF) came in at $120.1 million compared with the negative $610.6 million recorded in the corresponding period of 2020.

2021 Guidance Down

Amid the global semiconductor shortage and higher commodity costs, Lear has revised the full-year 2021 guidance downward. Full-year net sales are expected between $19.7 billion and $20.5 billion, lower than the earlier forecast of $20.3-$21.1 billion. Core operating earnings are forecast in the band of $920-$1,110 million, less than the prior outlook of $1,140-$1,310 million. Capital spending is anticipated to be $625 million. FCF is envisioned in the range of $350-$500 million compared with the previous outlook of $550-$700 million.

Lear — whose peers include Magna International MGA, Adient PLC ADNT and American Axle and Manufacturing AXL — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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