Lear Reports First Quarter 2024 Results
Lear (LEA) reported strong first quarter 2024 results with record revenue of $6.0 billion, a 3% increase year-over-year. The company's net income was $110 million, adjusted net income was $183 million, core operating earnings increased 6% to $280 million, and earnings per share were $1.90. Lear acquired WIP Industrial Automation, had significant growth in E-Systems, and announced new projects. Cash and cash equivalents stood at $930 million at quarter end. The company repurchased $30 million of shares and extended its authorization to $1.5 billion until 2026. The financial outlook for 2024 remains positive with expected net sales between $24,000 million and $24,600 million.
Lear reported a record revenue of $6.0 billion for the first quarter of 2024, marking a 3% increase over the previous year.
The company's net income for the quarter was $110 million, with adjusted net income reaching $183 million, showcasing strong financial performance.
Core operating earnings increased by 6% to $280 million, demonstrating operational efficiency and profitability growth.
Earnings per share were $1.90, reflecting a solid performance in the first quarter of 2024.
Lear's acquisition of WIP Industrial Automation and new projects in thermal comfort and automotive manufacturing signal strategic growth and diversification.
The company's cash and cash equivalents of $930 million at quarter end provide financial stability and liquidity.
Lear extended its share repurchase authorization to $1.5 billion until 2026, showcasing confidence in future growth and investor returns.
The company's 2024 financial outlook remains positive, with expected net sales between $24,000 million and $24,600 million, highlighting continued growth and profitability.
Despite positive financial results, Lear reported a free cash flow of $(148) million in the first quarter of 2024, indicating operational cash challenges.
The company experienced a net cash outflow of $(35) million in operating activities during the quarter, raising concerns about short-term financial management.
Lear's core operating earnings margin of 4.7% in the first quarter, while improved, remains relatively low compared to industry benchmarks, signaling potential efficiency issues.
Operational restructuring charges and other special items totaling $74 million in the first quarter may impact future profitability and cash flow.
The financial outlook includes restructuring costs of approximately $125 million, indicating ongoing operational challenges and potential cost implications.
While the company extended its share repurchase authorization, the high percentage of market capitalization allocated to this program may limit future investment opportunities.
Insights
Lear Corporation's recent financial results highlight several key aspects that investors should be aware of. The company's record first-quarter revenue of $6.0 billion represents a 3% increase year-over-year, which is a positive indicator of growth, especially as it outpaces the global industry production by a notable margin. The net income figures, however, show a slight decrease from $144 million to $110 million, indicating some underlying pressures on profitability that deserve investor scrutiny.
The adjusted earnings per share increase of 14% suggests operational efficiency and a successful share repurchase program, enhancing shareholder value. Nevertheless, the reported negative free cash flow and operational cash flow highlight capital-intensive activities or possible timing issues in cash management that might concern investors looking at the company's liquidity position in the short term.
Strategically, the acquisition of WIP Industrial Automation could be significant for Lear's long-term growth, signaling an expansion into automation and artificial intelligence. This could potentially improve their operational efficiency and create new revenue streams, though the actual integration and realization of these benefits will be key to monitor. The increased share repurchase authorization also reflects confidence from the board in the company's value proposition. However, aggressive buybacks can also be a double-edged sword if not balanced with the need for investment in growth opportunities or if it leads to an over-leveraged balance sheet.
Overall, these results and strategic moves should be examined in the context of the company's long-term strategy and the automotive industry's cyclical nature, which could affect future performance.
Lear's performance in the E-Systems segment, particularly the year-over-year margin improvement, is commendable in the context of a technology-driven industry. Given the industry's current trajectory towards electrification and smart technology, Lear's growth in this domain suggests alignment with market trends and customer demands. Furthermore, the launch of thermal comfort projects and a complete seat module directly speaks to the increasing integration of comfort and technology in vehicle design, a significant value proposition for OEM customers and end-users alike.
Investors should recognize the strategic importance of Lear's first JIT seat program with FAW Toyota in China, tapping into one of the largest automotive markets. This could provide a foothold for future expansion and solidify customer relationships. The recognition as a GM Supplier of the Year indicates a strong reputation in the industry, possibly translating into sustained business relationships and a stable revenue stream.
However, the decision to close plants in Europe to improve manufacturing costs underscores challenges in adapting to changing production environments. Investors should consider potential risks associated with such restructuring, including one-time costs and the impact on Lear's workforce and operational capabilities in the near term.
From an industry perspective, Lear Corporation's ability to outperform global industry production with sales growth in both Seating and E-Systems segments is indicative of strong product demand and market positioning. Such performance, especially amidst a global vehicle production decrease, can be attributed to Lear's diversified product portfolio and strategic customer relationships, which are critical in the automotive sector.
Moreover, the introduction of IDEA by Lear, which seems to be a new initiative focused on innovation and automation, reflects Lear's commitment to maintaining a competitive edge in a rapidly evolving industry. The ability to innovate and adapt is important in the automotive sector and IDEA by Lear may represent a proactive approach in a market where technology cycles are becoming shorter.
The announced projects and programs with major manufacturers, like the component modularity projects and the JIT seat program, demonstrate Lear's integration within the supply chains of significant players, which is essential for stability and growth. However, the reliance on a few large customers could also pose concentration risks that investors need to consider, particularly if there are shifts in market dynamics or client strategies.
First Quarter 2024 Highlights
- Delivered first quarter record revenue of
$6.0 billion 3% compared to$5.8 billion - Sales outperformed global industry production, driven by growth over market in E-Systems of 10 percentage points
- Net income of
$110 million $183 million $144 million $166 million - Core operating earnings increased
6% to$280 million $263 - Earnings per share of
$1.90 $3.18 $2.41 $2.78 - Adjusted earnings per share increased
14% in the first quarter compared to the same period last year - Net cash used in operating activities of
$(35) million $(148) million $(36) million $(147) million - Seventh consecutive quarter of year-over-year margin improvement in E-Systems
- Announced the acquisition of WIP Industrial Automation to further strengthen our automation and artificial intelligence capabilities; expected to close by Q3 2024
- Accelerating momentum in thermal comfort with two component modularity projects launching in late 2024; initiated validation work for our first complete seat module scheduled to launch in
North America in 2026 - Awarded our first JIT seat program with FAW Toyota for a new sedan in
China - Recognized as a GM Supplier of the Year for the 7th consecutive year and for the 23rd time overall
- Cash and cash equivalents at quarter end of
$930 million $2.9 billion - Increased the Company's share repurchase authorization to
$1.5 billion - Repurchased
$30 million $46 million
"Lear started 2024 strong, delivering record first quarter total company revenue and improved year-over-year margins in E-Systems for the seventh consecutive quarter," said Ray Scott, Lear's President and Chief Executive Officer. "We have made substantial progress on our thermal comfort strategy, and during the quarter, initiated the validation of our first complete seat module scheduled to launch in 2026 with a global automotive manufacturer. In E-Systems, we continue to leverage our strong relationships to diversify our customer base, leading to our second wire award with BMW. Today, we are introducing IDEA by Lear, an evolution of our commitment to develop innovative products and utilize automation to grow revenue, improve margins and extend our leadership position in operational excellence."
First Quarter Financial Results | |||
2024 | 2023 | ||
Reported | |||
Sales | |||
Net income | |||
Earnings per share | |||
Adjusted(1) | |||
Core operating earnings | |||
Adjusted net income | |||
Adjusted earnings per share | |||
In the first quarter, global vehicle production decreased by
Sales in the first quarter increased
Core operating earnings were
Earnings per share were
In the first quarter of 2024, net cash used in operating activities was
(1) For more information regarding our non-GAAP financial measures, see "Non-GAAP Financial Information" below.
(2) The production change on a Lear sales-weighted basis is calculated using Lear's prior year regional sales mix and first quarter fiscal calendar. Management believes this provides a more meaningful comparison of the Company's global revenue growth relative to global vehicle production.
Share Repurchase Program
During the first quarter of 2024, Lear repurchased 215,774 shares of our common stock for a total of
Since initiating the share repurchase program in 2011, we have repurchased 55.7 million shares of our common stock for a total of
2024 Financial Outlook
Our 2024 financial outlook, which is unchanged from our prior outlook, is summarized below:
Full Year 2024 Financial Outlook | |||
Net Sales | |||
Core Operating Earnings | |||
Adjusted EBITDA | |||
Restructuring Costs | ≈ | ||
Operating Cash Flow | |||
Capital Spending | ≈ | ||
Free Cash Flow |
The financial outlook is based on a full year average exchange rate of
Certain of the forward-looking financial measures above are provided on a non-GAAP basis. The Company does not provide a reconciliation of such forward-looking measures to the most directly comparable financial measures calculated and presented in accordance with GAAP because to do so would be potentially misleading and not practical given the difficulty of projecting event-driven transactional and other non-core operating items in any future period. The magnitude of these items, however, may be significant.
First Quarter 2024 Conference Call and Webcast Information
A conference call and webcast will be held to discuss Lear's first quarter 2024 financial results and related matters on April 30, 2024, at 8:30 a.m. EDT. The webcast link for the conference call will be available through Lear's investor relations webpage at ir.lear.com. In addition, the conference call can be accessed by dialing 1-877-883-0383 (domestic) or 1-412-902-6506 (international) with Conference I.D. 9500216. The webcast replay will be available two hours following the call.
Non-GAAP Financial Information
In addition to the results reported in accordance with accounting principles generally accepted in
Management believes the non-GAAP financial measures used in this press release are useful to both management and investors in their analysis of the Company's financial position and results of operations. In particular, management believes that core operating earnings, adjusted EBITDA, adjusted depreciation and amortization, adjusted net income and adjusted earnings per share are useful measures in assessing the Company's financial performance by excluding certain items that are not indicative of the Company's core operating performance or that may obscure trends useful in evaluating the Company's continuing operating activities. Management also believes that these measures provide improved comparability between fiscal periods. Management believes that free cash flow is useful to both management and investors in their analysis of the Company's ability to service and repay its debt. Further, management uses these non-GAAP financial measures for planning and forecasting future periods.
Core operating earnings, adjusted EBITDA, adjusted depreciation and amortization, adjusted net income, adjusted earnings per share and free cash flow should not be considered in isolation or as a substitute for net income attributable to Lear, diluted net income per share attributable to Lear, cash provided by (used in) operating activities or other income statement or cash flow statement data prepared in accordance with GAAP or as a measure of profitability or liquidity. In addition, the calculation of free cash flow does not reflect cash used to service debt and, therefore, does not reflect funds available for investment or other discretionary uses. Also, these non-GAAP financial measures, as determined and presented by the Company, may not be comparable to related or similarly titled measures reported by other companies. Set forth below are reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding anticipated financial results and liquidity. The words "will," "may," "designed to," "outlook," "believes," "should," "anticipates," "plans," "expects," "intends," "estimates," "forecasts" and similar expressions identify certain of these forward-looking statements. The Company also may provide forward-looking statements in oral statements or other written materials released to the public. All statements contained or incorporated in this press release or in any other public statements that address operating performance, events or developments that the Company expects or anticipates may occur in the future are forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements are discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, and its other Securities and Exchange Commission filings. Future operating results will be based on various factors, including actual industry production volumes, supply chain disruptions, labor disruptions, commodity prices, changes in foreign exchange rates, the impact of restructuring actions and the Company's success in implementing its operating strategy.
Information in this press release relies on assumptions in the Company's core sales backlog. The Company's core sales backlog reflects anticipated net sales from formally awarded new programs less lost and discontinued programs and excludes the impact of non-core products winding down in our E-Systems business. The Company enters into contracts with its customers to provide production parts generally at the beginning of a vehicle's life cycle. Typically, these contracts do not provide for a specified quantity of production, and many of these contracts may be terminated by the Company's customers at any time. Therefore, these contracts do not represent firm orders. Further, the calculation of the core sales backlog does not reflect customer price reductions on existing or newly awarded programs. The core sales backlog may be impacted by various assumptions embedded in the calculation, including vehicle production levels on new programs, foreign exchange rates and the timing of major program launches.
The forward-looking statements in this press release are made as of the date hereof, and the Company does not assume any obligation to update, amend or clarify them to reflect events, new information or circumstances occurring after the date hereof.
About Lear Corporation
Lear, a global automotive technology leader in Seating and E-Systems, enables superior in-vehicle experiences for consumers around the world. Lear's diverse team of talented employees in 38 countries is driven by a commitment to innovation, operational excellence, and sustainability. Lear is Making every drive better™ by providing the technology for safer, smarter, and more comfortable journeys. Lear, headquartered in
Lear Corporation and Subsidiaries Condensed Consolidated Statements of Income (Unaudited; in millions, except per share amounts) | ||||
Three Months Ended | ||||
March 30, | April 1, | |||
Net sales | $ 5,994.6 | $ 5,845.5 | ||
Cost of sales | 5,596.5 | 5,415.5 | ||
Selling, general and administrative expenses | 186.5 | 176.8 | ||
Amortization of intangible assets | 15.1 | 15.9 | ||
Interest expense | 26.1 | 24.2 | ||
Other expense, net | 13.5 | 13.7 | ||
Consolidated income before income taxes and equity in net income of affiliates | 156.9 | 199.4 | ||
Income taxes | 40.5 | 45.6 | ||
Equity in net income of affiliates | (10.5) | (9.6) | ||
Consolidated net income | 126.9 | 163.4 | ||
Net income attributable to noncontrolling interests | 17.3 | 19.8 | ||
Net income attributable to Lear | $ 109.6 | $ 143.6 | ||
Diluted net income per share attributable to Lear | $ 1.90 | $ 2.41 | ||
Weighted average number of diluted shares outstanding | 57.6 | 59.6 | ||
Lear Corporation and Subsidiaries Condensed Consolidated Balance Sheets (In millions) | ||||
March 30, | December 31, | |||
(Unaudited) | (Audited) | |||
ASSETS | ||||
Current: | ||||
Cash and cash equivalents | $ 930.4 | $ 1,196.3 | ||
Accounts receivable | 4,154.9 | 3,681.2 | ||
Inventories | 1,735.4 | 1,758.0 | ||
Other | 1,087.0 | 1,001.4 | ||
7,907.7 | 7,636.9 | |||
Long-Term: | ||||
PP&E, net | 2,910.4 | 2,977.4 | ||
Goodwill | 1,719.9 | 1,737.9 | ||
Other | 2,334.0 | 2,343.3 | ||
6,964.3 | 7,058.6 | |||
Total Assets | $ 14,872.0 | $ 14,695.5 | ||
LIABILITIES AND EQUITY | ||||
Current: | ||||
Short-term borrowings | $ 27.0 | $ 27.5 | ||
Accounts payable and drafts | 3,688.7 | 3,434.2 | ||
Accrued liabilities | 2,227.0 | 2,205.2 | ||
Current portion of long-term debt | 0.3 | 0.3 | ||
5,943.0 | 5,667.2 | |||
Long-Term: | ||||
Long-term debt | 2,743.0 | 2,742.6 | ||
Other | 1,199.8 | 1,225.1 | ||
3,942.8 | 3,967.7 | |||
Equity | 4,986.2 | 5,060.6 | ||
Total Liabilities and Equity | $ 14,872.0 | $ 14,695.5 | ||
Lear Corporation and Subsidiaries Consolidated Supplemental Data (Unaudited; in millions, except content per vehicle and per share amounts) | ||||
Three Months Ended | ||||
March 30, | April 1, | |||
Net Sales | ||||
$ 2,475.9 | $ 2,380.0 | |||
2,253.8 | 2,231.0 | |||
1,059.7 | 1,019.5 | |||
205.2 | 215.0 | |||
Total | $ 5,994.6 | $ 5,845.5 | ||
Content per Vehicle 1 | ||||
$ 628 | $ 612 | |||
$ 484 | $ 468 | |||
Free Cash Flow 2 | ||||
Net cash used in operating activities | $ (34.6) | $ (35.6) | ||
Capital expenditures | (113.6) | (111.8) | ||
Free cash flow | $ (148.2) | $ (147.4) | ||
Core Operating Earnings 2 | ||||
Net income attributable to Lear | $ 109.6 | $ 143.6 | ||
Interest expense | 26.1 | 24.2 | ||
Other expense, net | 13.5 | 13.7 | ||
Income taxes | 40.5 | 45.6 | ||
Equity in net income of affiliates | (10.5) | (9.6) | ||
Net income attributable to noncontrolling interests | 17.3 | 19.8 | ||
Restructuring costs and other special items - | ||||
Costs related to restructuring actions | 54.3 | 14.6 | ||
Acquisition costs | 0.1 | 0.3 | ||
Impairments related to Fisker | 14.5 | — | ||
Impairments related to Russian operations | 1.4 | — | ||
Intangible asset impairment | — | 0.9 | ||
Costs related to Typhoon in | — | 0.5 | ||
Other | 13.0 | 9.8 | ||
Core operating earnings | $ 279.8 | $ 263.4 | ||
Lear Corporation and Subsidiaries Consolidated Supplemental Data (continued) (Unaudited; in millions, except content per vehicle and per share amounts) | ||||
Three Months Ended | ||||
March 30, | April 1, | |||
Adjusted Net Income and Adjusted Earnings Per Share 2 | ||||
Net income attributable to Lear | $ 109.6 | $ 143.6 | ||
Restructuring costs and other special items - | ||||
Costs related to restructuring actions | 54.3 | 14.6 | ||
Acquisition costs | 0.1 | 0.3 | ||
Impairments related to Fisker | 14.5 | — | ||
Impairments related to Russian operations | 1.4 | — | ||
Intangible asset impairment | — | 0.9 | ||
Costs related to Typhoon in | — | 0.5 | ||
Foreign exchange (gains) losses due to foreign exchange rate volatility | — | (1.0) | ||
Loss related to affiliate | 2.2 | 5.0 | ||
Other | 13.8 | 5.0 | ||
Tax impact of special items and other net tax adjustments 3 | (12.7) | (3.1) | ||
Adjusted net income | $ 183.2 | $ 165.8 | ||
Weighted average number of diluted shares outstanding | 57.6 | 59.6 | ||
Diluted net income per share available to Lear | $ 1.90 | $ 2.41 | ||
Adjusted earnings per share | $ 3.18 | $ 2.78 | ||
Adjusted Depreciation and Amortization 2 | ||||
Depreciation and amortization | $ 155.3 | $ 147.2 | ||
Less - Intangible asset impairment | — | 0.9 | ||
Adjusted depreciation and amortization | $ 155.3 | $ 146.3 | ||
Diluted Shares Outstanding at End of Period 4 | 57,417,052 | 59,392,786 | ||
1 Content per Vehicle for 2023 has been updated to reflect actual production levels. | ||||
2 See "Non-GAAP Financial Information" included in this press release. | ||||
3 Represents the tax effect of restructuring costs and other special items, as well as several discrete tax items. The identification of these tax items is judgmental in nature, and their calculation is based on various assumptions and estimates. | ||||
4 Calculated using stock price at end of quarter. | ||||
Lear Corporation and Subsidiaries Segment Supplemental Data (Unaudited; in millions, except margins) | ||||
Three Months Ended | ||||
March 30, | April 1, | |||
Adjusted Segment Earnings | ||||
Seating | ||||
Net sales | $ 4,477.6 | $ 4,453.0 | ||
Segment earnings | $ 241.6 | $ 285.8 | ||
Restructuring costs and other special items - | ||||
Costs related to restructuring actions | 43.7 | 12.0 | ||
Impairments related to Fisker | 2.3 | — | ||
Impairments related to Russian operations | 1.4 | — | ||
Other | 5.9 | 2.6 | ||
Adjusted segment earnings | $ 294.9 | $ 300.4 | ||
Segment margins | 5.4 % | 6.4 % | ||
Adjusted segment margins | 6.6 % | 6.7 % | ||
E-Systems | ||||
Net sales | $ 1,517.0 | $ 1,392.5 | ||
Segment earnings | $ 54.1 | $ 42.3 | ||
Restructuring and other special items - | ||||
Costs related to restructuring actions | 8.8 | 2.3 | ||
Impairments related to Fisker | 12.2 | — | ||
Intangible asset impairment | — | 0.9 | ||
Costs related to typhoon in | — | 0.4 | ||
Other | 2.0 | 3.0 | ||
Adjusted segment earnings | $ 77.1 | $ 48.9 | ||
Segment margins | 3.6 % | 3.0 % | ||
Adjusted segment margins | 5.1 % | 3.5 % | ||
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SOURCE Lear Corporation
FAQ
What was Lear 's revenue in the first quarter of 2024?
Lear reported a record revenue of $6.0 billion in the first quarter of 2024, representing a 3% increase over the previous year.
What was Lear 's net income for the first quarter of 2024?
Lear 's net income for the first quarter of 2024 was $110 million, with an adjusted net income of $183 million.
Did Lear repurchase any shares in the first quarter of 2024?
Yes, Lear repurchased 215,774 shares of common stock for a total of $30 million in the first quarter of 2024.
What is Lear 's extended share repurchase authorization amount and period?
Lear extended its share repurchase authorization to $1.5 billion and the authorization period until December 31, 2026.
What is Lear 's 2024 financial outlook for net sales?
Lear 's 2024 financial outlook includes expected net sales between $24,000 million and $24,600 million.
