Lear To Beat Consensus For FY 2019?

January 22nd, 2020 by Trefis Team
+37.53%
Upside
94.53
Market
130
Trefis
LEA: Lear logo
LEA
Lear

Lear Corporation (NYSE: LEA) is slated to release its Q4 and full-year 2019 results on January 28, 2020. We believe that Lear’s Revenues and Earnings will beat consensus. We expect Lear to report revenues of $19.9 billion (vs. consensus estimate of $19.4 billion), which would be 5.8% lower than the previous year. Earnings are likely to be around $14.44 (vs. consensus estimate of $13.50), down from $17.37 reported in 2018, due to a combination of lower revenues and a fall in net income margin. We believe that stronger-than-expected earnings for FY 2019 would be unable to overshadow negative revenue growth and will likely result in a slight negative movement in Lear’s stock price once earnings are announced.  In fact, our forecast indicates that Lear’s valuation is $134 a share, which is roughly 2% less than the current price of around $137.

A] Revenue expected to be in higher than the Consensus

  • Total revenues have increased from $18.6 billion in 2016 to $21.1 billion in 2018.
  • Trefis estimates Lear’s revenues to decrease due to the global slowdown by 5.8% to $19.9 billion in 2019.
  • Revenue from both the segments are expected to see a fall with the Seating segment expected to fall by 6.9%.

A separate interactive dashboard for Lear provides an in-depth view of Lear’s revenue trend and segment-wise revenue performance, along with forecast for 2019.

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B] EPS To Be Higher Than Expected

  • Lear’s 2019 earnings per share (EPS) is expected to be $14.44 per Trefis analysis, higher than the consensus estimate of $13.50 per share.
  • A fall in revenues as detailed above coupled with a slower reduction in total expenses offset by a lower share count will drive the EPS fall compared to 2018.
  • As we forecast Lear’s Revenues to fall and Expenses to have a slower reduction in 2019 (-6.6% vs -5.5%), this will result in a fall in Lear’s Net Income Margin figure from 5.4% in 2018 to 4.4% in 2019.

 

C] Stock Price Estimate just below Market Price

  • A trailing P/E multiple of 9.3x looks appropriate for Lear’s stock, as opposed to current implied P/E multiple of 10.2x.
  • As per Trefis, Lear’s 2019 revenue and earnings will be higher than the market expectations. This forecast works out to a fair value of $134 for Lear’s stock, which is slightly lower than its current market price of around $137.

Additionally, you can input your estimates for Lear’s key metrics in our interactive dashboard for Lear’s pre-earnings, and see how that will affect the company’s stock price.

 

 

See all Trefis Price Estimates and Download Trefis Data here

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