Lear CorporationLEA is set to release first-quarter 2018 results before the market opens on Apr 26. Last quarter, the company delivered a positive earnings surprise of 3.1%. In fact, the company has surpassed the earnings estimates in the trailing four quarters, recording an average beat of 5.3%.
In the last three months, shares of Lear have outperformed the industry it belongs to. During the period, the stock lost 0.5% in comparison to industry's decline of 5.6%.
Let's see how things are shaping up for the forthcoming announcement.
Lear Corporation Price and EPS Surprise
Factors to Consider
Lear has provided a positive outlook for 2018. It anticipates sales to be in the range of $21.4-$21.6 billion compared with $20.5 billion in 2017. Core operating earnings are expected to be in the range of $1.75- $1.78 billion in comparison with $1.7 billion generated in 2017.
In order to strengthen its market share and expand its product offering, the company regularly undertakes strategic acquisitions in both the segments. In the Seating segment, it acquired Grupo Antolin's seating business. While in the E-Systems segment, the company signed an agreement to buyout EXO Technologies in 2017.
In February, the company announced that its board has approved share repurchase authorization of $1.5 billion till Dec 31, 2020. This adds to $546 million remaining on its share repurchase authorization at the end of 2017. Additionally, Lear raised the quarterly dividend by 40% to 70 cents per share, which was paid on Mar 26, 2018 to shareholders of record Mar 7, 2018. Regular dividend payments and share repurchases boost the shareholders confidence in the company.
However, a continuous rise in Selling, general and administrative expenses (SG&A) is a concern for the company. In 2017, the figure witnessed a rise of more than 2% compared with the prior year.
Our proven model does not conclusively show that Lear is likely to beat earnings this quarter. This is because, a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.
Zacks ESP : Lear has an Earnings ESP of -1.60% as the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $4.83 and $4.91, respectively. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Zacks Rank : The company carries a Zacks Rank of 2. However, this combined with its Earnings ESP, makes the surprise prediction difficult. Note that we caution against Rank #4 (Sell) and 5 (Strong Sell) stocks going into the earnings announcement, especially when the company is witnessing negative estimate revisions.
Other Stocks to Consider
Here are a few other stocks worth considering from the same space, with the right combination of elements to outpace earnings estimates this time around:
Tenneco Inc. TEN has an Earnings ESP of +0.90% and a Zacks Rank of 3. The company is expected to report first-quarter 2018 results on Apr 27. You can see the complete list of today's Zacks #1 Rank stocks here .
Cummins Inc. CMI has an Earnings ESP of +0.44% and a #2 Ranked player. Its first-quarter 2018 results are slated to be announced on May 1.
American Axle & Manufacturing Holdings, Inc. AXL has an Earnings ESP of +3.45% and a Zacks Rank of 3. The company will report its first-quarter 2018 results on May 4.
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