DNZOY Denso Corp Ltd (PK)

Lear Corp. (LEA) posted a 5.8% fall in adjusted earnings per share to $1.30 in the first quarter of 2013 from $1.38 in the corresponding quarter last year. However, earnings per share comfortably outpaced the Zacks Consensus Estimate of $1.09. Net income declined 11.1% to $124.4 million from $140.0 million in the year-ago quarter.

Revenues increased 8.3% to $3.9 million in the reported quarter, surpassing the Zacks Consensus Estimate of $3.7 million. However, global industry production decreased 1% year over year, with an 8% fall in Europe. Production improved 12% in China and 1% in North America.

Segment Results

Revenues from the Seating segment went up 3.5% to $2.9 billion. However, adjusted earnings declined 13.2% to $163.8 million or 5.6% of sales from $188.8 million or 6.7% a year ago. The year-over-year decline in earnings was driven by lower production from Europe and increased launch costs in South America.

Revenues from Electrical Power Management Systems segment rose 24.7% to $1.0 billion. Addition of new businesses and higher production had a favorable impact on revenues. Adjusted earnings went up 66.7% to $89.7 million or 8.7% of sales from $53.8 million or 6.5% in the year-ago quarter, driven by higher sales and improved operating efficiencies.

Share Repurchase

In Jan 2013, Lear authorized an additional $800 million under the existing repurchase program. In the first quarter of 2013, the company has repurchased 3.7 million shares for $200 million, bringing the total repurchase to 15.2 million shares for $702 million since the inception of the share repurchase program in the first quarter of 2013.

In Apr 2013, the company has authorized an additional $750 million for repurchases, with total authorization of $1.55 billion since Jan 2013. With this, Lear has authorized $2.25 billion for share repurchases since the inception of the program.

Financial Details

Lear had cash and cash equivalents of $1.6 billion as of Mar 30, 2013, compared with $1.4 billion as of Dec 31, 2012. Long-term debt amounted to $1.1 billion as of Mar 30, 2013 compared with $626.3 million as of Dec 31, 2012.

For the first three months of 2013, cash flow from operating activities amounted to $63.8 million, significantly up from $4.2 million in the same period of 2012. Capital expenditure amounted to $91.6 million compared with $69.3 million a year ago. The company had free cash outflow of $27.8 million in the first three months of 2013 compared with $65.1 million in the corresponding period last year.

Outlook

In 2013, Lear anticipates revenues between $15.0 and $15.5 billion, with operating earnings in the range of $725.0–$775.0 million. Adjusted net income is expected between $420.0 million and $455.0 million for the year. Free cash flow is estimated to be $275.0 million while capital spending is expected to be $450.0 million for the year.

Our Take

Lear Corp. designs, manufactures, assembles, and supplies automotive seat systems, electrical distribution systems, and related components primarily to automotive original equipment manufacturers. The company sells its products chiefly in North America, South America, Europe, and Asia. Currently, it retains a Zacks Rank #3 (Hold).

Some other stocks that are performing well in the industry where Lear Corp. operates include Gentherm Incorporated (THRM), Visteon Corp. (VC) and Denso Corp. (DNZOY). All these companies carry a Zacks Rank #1 (Strong Buy).
 

 
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