Lear Corporation (LEA) | Investment Case

1. Company Snapshot

1.a. Company Description

Lear Corporation designs, develops, engineers, manufactures, assembles, and supplies automotive seating, and electrical distribution systems and related components for automotive original equipment manufacturers in North America, Europe, Africa, Asia, and South America.Its Seating segment offers seat systems, seat subsystems, keyseat components, seat trim covers, seat mechanisms, seat foams, and headrests, as well as surface materials, such as leather and fabric for automobiles and light trucks, compact cars, pick-up trucks, and sport utility vehicles.The company's E-Systems segment provides electrical distribution and connection systems that route electrical signals and networks; and manage electrical power within the vehicle for various powertrains.

This segment's products comprise wire harnesses, terminals and connectors, engineered components, and junction boxes; electronic system products, including body domain control modules, smart and passive junction boxes, gateway and communication modules, integrated power modules, and high voltage switching and power control systems.It also offers software and connected services comprising Xevo Market, an in-vehicle commerce and service platform; and software and services for the cloud, vehicles, and mobile devices.In addition, this segment provides cybersecurity software; advanced vehicle positioning for automated and autonomous driving applications; and short-range communication and cellular protocols for vehicle connectivity.

It offers its products and services under the XEVO, GUILFORD, EAGLE OTTAWA, ConfigurE+, INTUTM, LEAR CONNEXUSTM, EXO, JOURNEYWARE, ProTec, SMART JUNCTION BOX, STRUCSURE, AVENTINO, and TeXstyle brands.Lear Corporation was founded in 1917 and is headquartered in Southfield, Michigan.

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1.b. Last Insights on LEA

Lear Corporation's recent performance was driven by strong Q2 earnings, surpassing estimates with a solid segment performance. The company's robust earnings surprise history and positive earnings outlook contributed to its strength. Additionally, Lear's recent contract wins, global expansion, and resilience in a tough auto market reinforced its bullish thesis. The company's attractive valuation, trading at under 8x P/E with a well-covered 3.4% yield, also supported its performance.

1.c. Company Highlights

Last Price	107.78
Change Percentage	-1.06%
Open	108.99
Previous Close	108.94
Market Cap ( Millions)	5800
Volume	384806
Year High	113.1
Year Low	73.85
M A 50	103.67
M A 200	97.67

FCF Yield	12.67%
Dividend Yield	2.86%
ROE	9.17%
Debt / Equity	69.49%
Net Debt / EBIDTA	183.89%
Price To Book	1.12
Price Earnings Ratio	12.97
Price To FCF	7.89
Price To sales	0.25
EV / EBITDA	6.05

2. Lear Corporation's Q3 2025 Earnings: A Strong Performance Despite Cybersecurity Disruptions

Lear Corporation reported $5.7 billion in revenue for Q3 2025, a 2% increase from Q3 2024, with core operating earnings of $241 million and an operating margin of 4.2%. Adjusted earnings per share was $2.79, beating analyst estimates of $2.7. The company's third-quarter financial performance was at the higher end of expectations, despite a cybersecurity incident disrupting production for Jaguar Land Rover in September. Operating cash flow was $444 million, allowing for $100 million in share repurchases and a dividend of $0.77 per share.

Publication Date: Nov -13

                                    📋 Highlights
                                    Revenue Growth and Margin Impact::
                                                Q3 2025 revenue rose 2% to $5.7 billion, but core operating earnings of $241 million (4.2% margin) were below prior-year performance excluding a JLR cybersecurity disruption, which would have increased margins to above 4.7%.
Cash Flow and Shareholder Returns::
                                                Operating cash flow reached $444 million, enabling $100 million in share repurchases and a $0.77 dividend per share, with plans for $300 million in Q4 buybacks.
Full-Year Outlook Adjustments::
                                                2025 revenue guidance of $23 billion and operating margin of 4.5% remain intact, with free cash flow midpoint raised, despite a $20 million increase in restructuring costs and $30 million reduction in capital spending.
Segment Performance::
                                                Seating sales grew 3% to $4.2 billion (6.1% margin), while E-Systems sales fell 3% to $1.4 billion (4.2% margin), reflecting a $1.1 billion new business win in E-Systems and 2026/2027 backlog of $1.2 billion.
Onshoring and Automation Strategy::
                                                The company expects margin expansion from onshoring, automation savings ($65–75 million in 2026), and digital innovation (e.g., $100 million net performance improvement target), alongside a strong $3 billion liquidity position.

                                

Segment Performance

Seating sales increased 3% year-over-year to $4.2 billion, with adjusted earnings of $261 million and adjusted operating margins of 6.1%. E-Systems sales decreased 3% year-over-year to $1.4 billion, with adjusted earnings of $60 million and adjusted operating margins of 4.2%. The company's segment performance was driven by new business wins, including $1.1 billion in E-Systems and several awards in Seating with major automakers.

Outlook and Guidance

Lear Corporation raised the midpoint of its full-year free cash flow outlook and expects revenue to be approximately $23 billion, with an operating margin expected to be around 4.5%. Adjusted earnings per share are expected to be around $11. The company assumes global industry production will be up 2% compared to 2024. The midpoint of Lear's operating income outlook would be approximately $70 million higher without the JLR production disruption, and the full-year margin would be above 4.7%.

Valuation and Growth Prospects

With a P/E Ratio of 13.19 and an EV/EBITDA of 6.12, Lear Corporation's valuation appears reasonable. The company's robust pipeline of opportunities, driven by customers' onshoring efforts, positions it for additional growth in 2027 and beyond. Analysts estimate next year's revenue growth at 2.0%. Lear's focus on using excess cash for buybacks, targeting $300 million in the fourth quarter, and its investments in automation and digital strategy, are expected to drive higher returns on its seat business and protect or expand returns.

Management's Commentary

Lear's CEO, Raymond Scott, highlighted the company's competitive advantage in technology innovation, citing customer feedback that Lear has a significant advantage over its closest competitor. As Raymond Scott said, "We have a lot to do to finish up the full year, but I know we're built differently." This confidence is reflected in the company's plans to maintain its leadership position and disrupt the traditional purchasing model in the seating industry.

3. NewsRoom

Lear Corporation (LEA) Presents at Goldman Sachs Industrials & Autos Week Transcript

Dec -04

Source: seekingalpha.com

Lear Corporation (NYSE:LEA) Given Average Recommendation of “Hold” by Brokerages

Nov -26

Source: defenseworld.net

Lear to Participate in the Goldman Sachs 17th Annual Industrials & Autos Week

Nov -24

Source: prnewswire.com

Lear Declares Quarterly Cash Dividend

Nov -20

Source: prnewswire.com

Lear Analysts Increase Their Forecasts After Upbeat Results

Nov -03

Source: benzinga.com

Lear Corporation (LEA) Q3 2025 Earnings Call Transcript

Oct -31

Source: seekingalpha.com

Lear (LEA) Q3 Earnings: How Key Metrics Compare to Wall Street Estimates

Oct -31

Source: zacks.com

Lear (LEA) Q3 Earnings and Revenues Top Estimates

Oct -31

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.75%)

6. Segments

Seating

Expected Growth: 2.5%

Lear Corporation's 2.5% growth in seating is driven by increasing global vehicle production, rising demand for premium and electric vehicles, and growing adoption of advanced safety features. Additionally, Lear's focus on innovation, cost reduction, and strategic acquisitions have enabled the company to capitalize on these trends and maintain its market share.

E-Systems

Expected Growth: 3.5%

E-Systems from Lear Corporation's 3.5% growth is driven by increasing demand for electrification, autonomous driving, and connectivity in the automotive industry. Growing adoption of advanced safety features, rising sales of electric vehicles, and OEMs' focus on reducing emissions also contribute to this growth.

7. Detailed Products

Seating Systems

Lear Corporation designs and manufactures automotive seating systems, including seats, headrests, and armrests.

Electrical Systems

Lear Corporation develops and manufactures electrical systems, including electrical distribution systems, wiring harnesses, and battery systems.

E-Systems

Lear Corporation offers E-Systems, a range of electrification solutions, including electric motors, power electronics, and battery management systems.

Connected Systems

Lear Corporation develops and integrates connected systems, including infotainment systems, telematics, and autonomous driving technologies.

8. Lear Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Lear Corporation is medium due to the presence of alternative products and services in the automotive seating and electrical systems market.

Bargaining Power Of Customers

The bargaining power of customers for Lear Corporation is high due to the concentration of major automotive manufacturers, who have significant negotiating power.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Lear Corporation is medium due to the presence of multiple suppliers in the market, but with some concentration in certain areas.

Threat Of New Entrants

The threat of new entrants for Lear Corporation is low due to the high barriers to entry, including significant capital requirements and regulatory hurdles.

Intensity Of Rivalry

The intensity of rivalry for Lear Corporation is high due to the presence of established competitors in the automotive seating and electrical systems market.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	37.27%
Debt Cost	4.51%
Equity Weight	62.73%
Equity Cost	11.75%
WACC	9.05%
Leverage	59.41%

11. Quality Control: Lear Corporation passed 2 out of 9 key points

Strong Liquidity

Low Debt

Strong Interest Coverage

Healthy Cash Flow

Operating Inefficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Visteon

A-Score: 6.1/10

Value: 7.6

Growth: 7.3

Quality: 7.1

Yield: 0.0

Momentum: 8.0

Volatility: 6.7

1-Year Total Return ->

Lear

A-Score: 5.6/10

Value: 7.9

Growth: 5.1

Quality: 4.1

Yield: 5.0

Momentum: 4.0

Volatility: 7.3

1-Year Total Return ->

Dorman Products

A-Score: 5.6/10

Value: 3.7

Growth: 8.0

Quality: 6.5

Yield: 0.0

Momentum: 8.5

Volatility: 6.7

1-Year Total Return ->

LKQ

A-Score: 5.4/10

Value: 7.4

Growth: 5.4

Quality: 4.9

Yield: 6.0

Momentum: 2.0

Volatility: 7.0

1-Year Total Return ->

Gentex

A-Score: 5.4/10

Value: 7.3

Growth: 5.6

Quality: 5.4

Yield: 3.0

Momentum: 4.0

Volatility: 7.3

1-Year Total Return ->

BorgWarner

A-Score: 5.2/10

Value: 5.3

Growth: 3.7

Quality: 4.5

Yield: 2.0

Momentum: 8.0

Volatility: 8.0

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

-2.07%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

9.05%

Lear Corporation - US5218652049

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on LEA

1.c. Company Highlights

Less Volatile

Average Yield

Fairly Valued

Earnings Beats

Stable Momentum

Revenues Miss

Revenues Beats

Weak Momentum

Cheaper

Medium Volatility

Earnings Miss

2. Lear Corporation's Q3 2025 Earnings: A Strong Performance Despite Cybersecurity Disruptions

Segment Performance

Outlook and Guidance

Valuation and Growth Prospects

Management's Commentary

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.75%)

6. Segments

Seating

Expected Growth: 2.5%

E-Systems

Expected Growth: 3.5%

7. Detailed Products

Seating Systems

Electrical Systems

E-Systems

Connected Systems

8. Lear Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Lear Corporation passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

107.78$

Current Price

107.78$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA