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How Has The Global Auto Market Slowdown Affected Lear's Expenses?

Lear Corporation (NYSE: LEA), has its expenses largely clubbed under its cost of goods sold, which accounts for about 94% of the company’s total expenses in 2018. This is in line with previous few years as COGS has remained around 94% of Total Expenses. Over the years, along with an increase in Revenue, Lear has successfully been able to decrease its Cost of Goods Sold (as percentage of Revenue). This helped the Net Income margin as it went up from 4.1% in 2015 to 5.4% in 2018. Trefis expects the margin to be around 5.3% in 2019.

You can view the Trefis interactive dashboard – Lear Corporation: Breakdown Of Total Expenses – to better understand how the company’s total expenses have moved over the years and what is causing this change. In addition, here is more Consumer Discretionary data.

 

Total Expenses:

  • Lear’s total expenses have increased from $17.5 billion in 2015 to $20 billion in 2018, which is an increase of 14.3% over the years.
  • Most of this increase was driven by its cost of goods sold (COGS) expense.

 

Following is how each expense head has moved over the years. For more details of each expense please visit our interactive Dashboard on Lear’s Total Expenses:

  • The company has been more efficient operationally compared to 2015 Cost of Sales, as % of Revenue has declined from 90% of Total revenue in 2015 to 89% in 2018. Trefis estimates in 2019 the metric to remain around 89% of Total revenue.
  • Selling, General and Administrative expenses, which contribute 2.9% to Lear’s total expenses (in 2018), includes advertising and marketing cost, selling and distribution expense, and other general expenses. Selling, General and Administrative expenses as % of Revenue fell in 2018. Trefis estimates the metric to increase slightly to around 3% of Total revenue in 2019.
  • Amortization of Intangible Assets has not changed much sans a small fall in 2017. The metric was just 0.2% of Total Revenue in 2018 and Trefis estimates it to be around 0.3% of Total Revenue in 2019.
  • Interest expenses have been fluctuating over the last few years in both absolute terms and as % of Revenue. The metric has decreased from 0.5% of Total revenue in 2015 to 0.4% of Total revenue in 2018. Trefis estimates the metric to increase a bit to 0.5% of Total revenue in 2019.
  • Other Expenses (net) includes other non-operating expense (net of income). The metric was just 0.5% of Total Revenue in 2018 and Trefis estimates it to remain around 0.5% of Total Revenue in 2019.
  • Income Tax expenses saw a dip in 2017 due to a deferred tax benefit and increased back in 2018. In 2019 we expect the metric to be constant and overall Income Tax to be around 1.5% of Revenue.

 

 

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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