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Lear Corporation (NYSE:LEA) Annual Results: Here's What Analysts Are Forecasting For This Year

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Simply Wall St
·4 min read
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It's been a good week for Lear Corporation (NYSE:LEA) shareholders, because the company has just released its latest yearly results, and the shares gained 3.3% to US$156. It was a credible result overall, with revenues of US$17b and statutory earnings per share of US$2.62 both in line with analyst estimates, showing that Lear is executing in line with expectations. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for Lear

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Taking into account the latest results, the consensus forecast from Lear's 13 analysts is for revenues of US$20.5b in 2021, which would reflect a substantial 20% improvement in sales compared to the last 12 months. Per-share earnings are expected to soar 414% to US$13.48. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$20.3b and earnings per share (EPS) of US$14.08 in 2021. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.

It might be a surprise to learn that the consensus price target was broadly unchanged at US$176, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Lear, with the most bullish analyst valuing it at US$210 and the most bearish at US$130 per share. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. For example, we noticed that Lear's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 20%, well above its historical decline of 0.5% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 16% per year. So it looks like Lear is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Lear. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Lear going out to 2023, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 2 warning signs for Lear that you should be aware of.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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