Lear (LEA) Q2 Earnings Top Estimates as Both Units Outperform
Lear Corp LEA reported second-quarter 2023 adjusted earnings of $3.33 per share, which surged from $1.79 recorded in the year-ago quarter. The bottom line also surpassed the Zacks Consensus Estimate of $3.21 per share. Higher-than-expected revenues and profits from both the Seating and E-Systems segments led to the outperformance. In the reported quarter, revenues increased 18% year over year to $5,999.2 million. The top line also beat the Zacks Consensus Estimate of $5,859 million on higher-than-expected production on key platforms and the addition of new business in both segments.
Lear currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Segment Performance
Sales of the Seating segment totaled $4,468.1 million in the reported quarter, reflecting a 15.3% increase from the year-ago quarter and surpassing our estimate of $4,274 million thanks to higher-than-expected volumes, strong backlog and acquisition benefits. Segmental earnings came in at $292.9 million, up from $213.9 million recorded in the year-ago quarter. The reported figure also topped our forecast of $285 million on the sales outperformance. The segment recorded adjusted margins of 7.2% of sales, up from 6% in the previous-year quarter.
Sales in the E-Systems segment were $1,531.1 million, up 28% year over year. The figure also came ahead of our estimate of $1,511.3 million on strong volumes and backlog. Segmental earnings amounted to $52.90 million, up from $2 million in the corresponding quarter of 2022. The metric breezed past our projection of $24.5 million on sales outperformance. For the E-Systems segment, the adjusted margin was 4.1% of sales, up from 2% in the year-ago quarter.
Performance by Region
Sales in the North America region increased 12.6% year over year to $2,469.8 million in the quarter under review and exceeded our projection by $22.9 million.
Sales in the Europe and Africa region grew 25.6% year over year to $2,192.5 million in the quarter. The metric also topped our estimate of $1,978.7 million.
Sales in the Asia region increased 21% year over year to $1,109 million in the quarter, narrowly missing our forecast of $1,123 million.
Sales in the South America region rose 5% year over year to $227.8 million in the quarter, falling short of our prediction by $8.7 million.
Financial Position
The company had $901.9 million in cash and cash equivalents as of Jul 1, 2023 compared with $1,114.9 million recorded as of Dec 31, 2022. Long-term debt was $2,741.4 million at the quarter end compared with a debt of $2,591.2 million as of 2022-end.
During the quarter under discussion, net cash used in operating activities totaled $311.4 million, a noticeable improvement from $11.4 million in the corresponding quarter of 2022. In the reported period, its capital expenditure amounted to $168.3 million, down from $172.2 million. The company registered a free cash flow (FCF) of $158.3 million in the quarter under review compared to negative FCF of $160.8 million in the previous-year quarter.
During the quarter, LEA repurchased 286,630 shares of its common stock for a total of $38 million. At the end of the quarter, Lear had a remaining share repurchase authorization of nearly $1.2 billion, which will expire on Dec 31, 2024. In the second quarter of 2023, Lear returned $83 million to investors via buybacks and dividends.
2023 Guidance
Lear projects its full-year net sales in the band of $22,350-$23,050 million, up from $20,891 million recorded in 2022. Core operating earnings are envisioned in the range of $1,010-$1,140 million, implying an uptick from $871 million generated in 2022. Operating cash flow is projected within $1,180-$1,280 million. Lear anticipates FCF in the band of $480-$580 million. Capital spending is forecast to be $700 million. Adjusted EBITDA is envisioned within the range of $1,610-$1,740 million.
Peer Releases
Autoliv Inc. ALV reported second-quarter 2023 adjusted earnings of $1.93 per share, beating the Zacks Consensus Estimate of $1.45 and rocketing 115% year over year. Higher-than-expected revenues from the Airbags and Associated Products segment led to the outperformance. The company reported net sales of $2,635 million in the quarter, which topped the Zacks Consensus Estimate of $2,508 million and soared 27% year over year.
Autoliv had cash and cash equivalents of $475 million as of Jun 30, 2023. Long-term debt totaled $1,290 million. Net capital expenditure was $124 million compared with $139 million during the corresponding period of 2022. At quarter-end, FCF was $255 million against a negative FCF of $190 million in the year-ago period.
Allison Transmission Holdings ALSN delivered second-quarter 2023 earnings of $1.92 per share, which rose 52% year over year and topped the Zacks Consensus Estimate of $1.61 on higher-than-expected sales from the North America On-Highway segment. Quarterly revenues of $783 million grew 18% from the year-ago period and came ahead of the Zacks Consensus Estimate of $743 million.
Allison had cash and cash equivalents of $351 million on Jun 30, 2023, up from $232 million as of Dec 31, 2022. Long-term debt was $2,499 million compared with $2,501 million as of Dec 31, 2022. Net cash provided by operating activities increased to $141 million from $64 million in the same period in 2022. Adjusted FCF in the reported quarter was $122 million, an increase from $34 million a year ago.
BorgWarner BWA reported adjusted earnings of $1.35 per share for second-quarter 2023, up from $1.05 recorded in the prior-year quarter. The bottom line also outpaced the Zacks Consensus Estimate of $1.14 per share. The automotive equipment supplier reported net sales of $4,520 million, which surpassed the Zacks Consensus Estimate of $4,395 million. The top line also increased by 20% year over year.
BorgWarner had $848 million in cash/cash equivalents/restricted cash at quarter-end compared with $1,338 million as of Dec 31, 2022. Long-term debt was $4,191 million, up from $4,166 million recorded on Dec 31, 2022. Net cash provided in operating activities was $280 million in the quarter under review. Capital expenditures and FCF totaled $242 million and $38 million, respectively.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Autoliv, Inc. (ALV) : Free Stock Analysis Report
BorgWarner Inc. (BWA) : Free Stock Analysis Report
Lear Corporation (LEA) : Free Stock Analysis Report
Allison Transmission Holdings, Inc. (ALSN) : Free Stock Analysis Report
