A month has gone by since the last earnings report for Lear (LEA). Shares have added about 15.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Lear due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Lear's Q4 Earnings & Sales Increase Y/Y
Lear's fourth-quarter 2020 adjusted earnings came in at $3.66 per share, surpassing the Zacks Consensus Estimate of $3.37. Higher-than-expected revenues from both the company’s segments led to the outperformance. It recorded earnings of $2.64 per share in fourth-quarter 2019. For the reported quarter, revenues increased 8.3% year over year to $5,243.2 million. The top line also beat the Zacks Consensus Estimate of $5,014 million.
Sales in the Seating segment totaled $3,899.6 million for fourth-quarter 2020, reflecting an increase from the year-ago quarter’s $3,629.1 million. Moreover, the metric surpassed the Zacks Consensus Estimate of $3,659 million. Adjusted segmental earnings came in at $295.2 million, higher than $212.7 million recorded in the fourth quarter of 2019. The segment recorded adjusted margins of 7.6% of sales.
Sales in the E-Systems segment summed $1,343.6 million, up 13% year over year. The figure also topped the consensus mark of $1,244 million. Adjusted segmental earnings amounted to $102.6 million, higher than $91.9 million recorded in the year-ago quarter. For the E-Systems segment, adjusted margin was 7.6% of sales.
The company had $1,306.7 million of cash and cash equivalents as of Dec 31, 2020 compared with $1,487.7 million recorded in the corresponding period of 2019. It had a long-term debt of $2,300.3 million as of Dec 31, 2020 compared with $2,293.7 million recorded in the comparable period of 2019.
At third quarter-end, net cash provided by operating activities totaled $400.8 million, down from $485 million generated in the year-ago quarter. For the reported period, its capital expenditure amounted to $167 million, down from $193.8 million in the prior-year quarter. Free cash flow (FCF) came in at $233.8 million, lower than $291.2 million generated in the corresponding period of 2019.
Full-year net sales are expected between $19.8 billion and $20.8 billion. Core operating earnings are forecast in the band of $1,130-$1,300 million. Capital spending is anticipated to be $600 million. FCF is envisioned in the range of $550-$700 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 5.18% due to these changes.
Currently, Lear has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Lear has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.