Lear Tops Q1 Earnings Estimates; Target Price $214 in Best Case

Lear Corporation, an American company that manufactures automotive seating and automotive electrical systems, reported better-than-expected earnings and sales in the first quarter and lifted its 2021 financial outlook.

Sales increased 20% to $5.4 billion, compared to $4.5 billion in the first quarter of 2020. That was higher than the market expectations of $4.89 billion. That growth continued to outpace the market in both segments; E-Systems growth over the market of 10 percentage points and Seating growth over the market of 9 percentage points.

Lear reported a net income of $204 million and adjusted net income of $226 million, compared to $76 million and $124 million, respectively, in the first quarter of 2020. The company reported earnings per share of $3.36 and adjusted earnings per share of $3.73, compared to $1.26 and $2.05, respectively, in the first quarter of 2020. That was higher than the Wall Street consensus estimates of $2.95 per share.

U.S. auto parts maker upped its full-year 2021 net sales forecasts in the range of $20.35 billion – $21.15 billion and adjusted EBITDA between $1.70 billion – $1.87 billion, up from $19.8 billion to $20.8 billion and $1.69 billion to $1.86 billion, respectively.

However, Lear shares traded 0.8% lower at $190.51 on Friday. The stock rose over 20% so far this year.

Lear Stock Price Forecast

Twelve analysts who offered stock ratings for Lear in the last three months forecast the average price in 12 months of $195.60 with a high forecast of $214.00 and a low forecast of $181.00.

The average price target represents a 2.16% increase from the last price of $191.46. Of those 12 analysts, seven rated “Buy”, five rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price to $185 with a high of $270 under a bull scenario and $75 under the worst-case scenario. The firm gave an “Overweight” rating on the insurance company’s stock.

Several other analysts have also updated their stock outlook. Lear had its price target lifted by KeyCorp to $200 from $195. KeyCorp currently has an overweight rating on the auto parts company’s stock. Deutsche Bank lifted their target price to $165 from $150 and gave the stock a hold rating.

Analyst Comments

“We have an OW rating on LEA. The company’s ability to get additional CPV in both the Seating and E-Systems segments, for both ICE and BEV, should propel the stock in the coming years. Potential for investors to benefit from share appreciation, as well as the possible reinstatement of a dividend and share buybacks in 2021,” noted Adam Jonas, equity analyst at Morgan Stanley.

“Strong management team, a clean balance sheet, and strong FCF generation. LEA is well-positioned to be a secular beneficiary as they are powertrain agnostic in the Seating division and levered to EVs in E-Systems.”

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