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Lear's (LEA) Q3 Earnings Miss Estimates, 2021 View Tepid

Lear Corporation LEA reported third-quarter 2021 adjusted earnings of 53 cents per share, tanking 85.8% year over year. The bottom line also fell short of the Zacks Consensus Estimate of 56 cents. Lower-than-expected contribution from both the company’s segments led to the underperformance. For the reported quarter, revenues declined 12.9% year over year to $4,268.2 million. The top line, however, beat the Zacks Consensus Estimate of $4,182 million.

Lear Corporation Price, Consensus and EPS Surprise

Lear Corporation Price, Consensus and EPS Surprise
Lear Corporation Price, Consensus and EPS Surprise

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

Segment Performances

Sales in the Seating segment totaled $3,166.2 million for third-quarter 2021, reflecting a decline from the year-ago quarter’s $3,691.6 million. Nonetheless, the metric surpassed the Zacks Consensus Estimate of $3,133 million. Adjusted segmental earnings came in at $144 million, declining from $286.3 million recorded in third-quarter 2020 and missing the consensus mark of $176 million. The segment recorded adjusted margins of 4.5% of sales.

Sales in the E-Systems segment summed $1,102 million, down 8.8% year over year. The figure, however, topped the consensus mark of $1,036 million. Adjusted segmental earnings amounted to $23 million, plummeting from $93.1 million recorded in the year-ago quarter. The metric also lagged the consensus mark of $25 million. For the E-Systems segment, adjusted margin was 2.1% of sales.

Financial Position

The company had $1,099.1 million of cash and cash equivalents as of Oct 2, 2021 compared with $1,306.7 million recorded at 2020-end. It had long-term debt of $2,095.8 million as of Oct 2, 2021, down from $2,300.3 million as of Dec 31, 2020.

At third quarter-end, net cash used in operating activities totaled $4.4 million. For the reported period, its capital expenditure amounted to $152.6 million. Free cash flow (FCF) came in at a negative $157 million.

2021 Guidance Down

Amid persistent supply chain disruptions and shortage of components, Lear has downwardly revised its 2021 projections. Full-year net sales are now expected within $18.8-$19.2 billion, down from the previous guided range of $20.3-$21.1 billion. Core operating earnings are envisioned in the band of $750-$850 million, down from the prior expectation of $1,1340-$1,310 million. Lear — whose peers include Magna International MGA, Adient PLC ADNT and American Axle and Manufacturing AXL — now anticipates FCF of $175 million versus the prior view of 550-$700 million. Capital spending is anticipated to be $600 million.


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