Lear Corp.
(
LEA
) posted a 12.3% fall in adjusted earnings per share to $1.35 in
the second quarter of 2012 compared to $1.54 in the corresponding
quarter last year. However, profits surpassed the Zacks Consensus
Estimate by 6 cents per share. In absolute terms, profits slashed
18% to $135.4 million compared with $165.2 million in the year-ago
quarter.
Revenues decreased marginally by $11 million to $3,665.0 million in
the reported quarter, surpassing the Zacks Consensus Estimate of
$3,639 million. The decline in revenues was driven by challenging
economic condition in Europe, partially offset by positive impact
from higher productivity in North America and Japan due to recovery
of Japanese manufacturers.
Revenues from the Seating segment went down 2% to $2.8 billion,
driven by the negative impact of foreign exchange, which was
partially offset by positive impact from new business
additions.
Adjusted operating income declined to $185 million or 6.6% of
sales in the second quarter of 2012. The year-over-year fall in
earnings is driven by increased product and facility launch costs,
increased program development costs and lower production volume.
Revenues from Electrical Power Management Systems segment rose 7%
to $872 million. Addition of new businesses had a favorable impact
on revenues, which offset the negative impact of foreign
exchange.
Adjusted operating income went up to $59.1 million or 6.8% of
sales in the quarter driven by increase in sales and productivity,
partially offset by increased product and facility launch costs as
well as program development costs.
Share Repurchase
In the second quarter of 2012, Lear repurchased 1.8 million shares
for $70 million. Since the inception of the share repurchase
program, the company has repurchased 9.1 million shares for $402
million. The company had approximately $298 million worth of shares
remaining for repurchase at the end of the quarter.
Acquisition
In May, Lear completed the acquisition of Guilford, which is a
global leader of automotive and specialty fabrics. Guilford will
add global fabric design and technical expertise to Lear's existing
seat fabric and seat cover capabilities.
Financial Details
Lear had cash and cash equivalents of $1.3 billion as of June 30,
2012, declining from $1.8 as of December 31, 2011. Long-term debt
amounted to $695.6 million as of June 30, 2012 compared with $695.4
million as of December 31, 2011.
In the first half of 2012, cash flow from operating activities
amounted to $159.8 million, compared with $360.9 million in the
same period of 2011. Capital expenditure amounted to $175.9 million
in the period compared with $156.2 million in the first half of
2011. The company had free cash flow of $16.1 million during the
period compared with $204.7 million in the first half of 2011.
Outlook
Lear anticipates that revenues between $13.9 and $14.4 billion for
2012 with operating earnings in the range of $740 to $790 million.
Adjusted net income is expected between $510 and $540 million for
the year. Free cash flow is estimated to be $275 million with
capital expenditures of $435 million, a $10 million rise owing to
the Guilford acquisition.
Our Take
Lear Corporation 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.
Continuous investment in core businesses, expansion in emerging
markets and strategic acquisitions such as Guilford will spur
growth opportunities for Lear in the future. The company competes
with
Johnson Controls Inc.
(
JCI
). Currently, it retains a Zacks #3 Rank, which translates into a
short-term (1 to 3 months) Hold rating.
JOHNSON CONTROL (JCI): Free Stock Analysis
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