LEA changes
Pick any two versions below to diff them.
- Price
- $120.01 → $109.79(−8.5%)
- Discount category
- Below intrinsic value → Well below intrinsic value
- Next earnings
- Oct 30, 2026 → Jan 30, 2027
- Next earnings is estimate
- No → Yes
- Thesis
- The market prices Lear as a low-margin auto supplier whose profits depend on how many cars its customers build. Lear added: now expects global production to fall about removed: 2% added: 1% in 2026 on a Lear sales-weighted basis, North America and Europe still build fewer cars than at their past peaks, and car makers ask for lower prices each year. Tariffs and the USMCA review add risk, because the United States declined on July 1, 2026 to extend the agreement for a new 16-year term. Slower electric vehicle sales also limit growth in high-voltage E-Systems products. Investors fear that Lear cannot grow its margin, which was removed: 5.0% added: 4.4% of sales in removed: Q2 added: Q3 2026, through the cycle. removed: For the gap to close, added: On October 30, 2026, Lear removed: must meet added: cut its removed: raised 2026 added: sales and free cash flow outlooks because of lower production on key platforms, but it kept its outlook of $1,080 million to $1,200 million of core operating added: earnings. For the gap to close, Lear must reach that earnings added: outlook and removed: $590 added: $565 million to removed: $690 added: $665 million of free cash flow. E-Systems margins must keep removed: the improvement of Q2 2026, and the new added: improving, as they did in Q3 2026. New Seating programs, such as the removed: GM full-size SUVs and trucks, must added: complete seat plant in Orion, Michigan, which Lear expects to launch added: early in 2027, must start as planned. Lear must also use its removed: larger $1.5 billion buyback authorization while debt stays near its present level. The removed: Q3 2026 report on October 30, 2026, and the Q4 report with the 2027 removed: outlook added: outlook, expected in removed: about added: late January or February removed: 2027 give added: 2027, gives the next evidence. Because the market gives auto suppliers low values through the cycle, the gap can close only slowly, over several years of margin gains and buybacks. A large production cut or new tariffs can stop it.
- Risks
- Lear's sales follow car production. Lear expects global production to fall about removed: 2% added: 1% in 2026, and added: production on some of its key platforms fell in Q3 2026, and a recession or a production cut at a large customer such as General Motors, which gave 22% of 2025 sales, can cut earnings quickly. Tariffs and trade rules can change Lear's costs and its customers' production. The United States declined to extend the USMCA in its current form on July 1, 2026, and Lear's 2026 outlook excludes future tariff changes. Car makers ask for lower prices over the life of each model. If cost cuts and automation do not offset these price cuts and higher costs for steel, copper and leather, margins fall. Electric vehicle sales grow slower than expected, particularly in the United States. This limits demand for high-voltage E-Systems products, and E-Systems sales in North America fell in the first half of 2026. Lear works in 36 countries and earns much of its sales in euros and other currencies. Exchange rates change its reported sales and earnings.
- Balance sheet
- Cash: removed: $1.0B added: $889M Debt: removed: $2.8B added: $2.7B Net debt: removed: $1.7B added: $1.9B Interest cover: removed: 11× added: 10× Undrawn credit line: $2.0B, to July 2030 Debt due within 12 months: removed: $33M added: $671M Last debt due: 2052 Debt is removed: the principal of Lear's added: short-term borrowings and long-term removed: debt added: debt, including its current portion, at removed: July 4, 2026, $2,720.7 million, plus $28.8 added: October 3, 2026: $29.3 million of short-term removed: borrowings. added: borrowings, $641.3 million of current portion of long-term debt and $2,075.4 million of long-term debt. Most of it is removed: six issues of senior unsecured notes, from $550 million of 3.8% notes due September 15, 2027 to $350 million of 3.55% notes due 2052, and a $50 million term loan due September 30, 2027. added: The 2027 notes and the term loan are now in the current portion. Interest cover is income before interest, other expense and taxes divided by interest expense for the first removed: half added: nine months of 2026. Lear also removed: had $769.5 million of added: has operating lease obligations, which are not in debt here. removed: Total added: Cash was $889 million and total liquidity was removed: $3.0 added: $2.9 billion at removed: July 4, 2026, and added: October 3, 2026. Lear removed: was in compliance with its covenants. Lear says that it keeps investment grade credit metrics. Free cash flow was removed: $288 added: $158 million in removed: Q2 added: Q3 2026 and $420 million in the first nine months of 2026, and the added: new 2026 outlook is removed: $590 added: $565 million to removed: $690 added: $665 million. Lear bought back removed: $175 added: $350 million of shares in the first removed: half added: nine months of 2026, and removed: its Board raised the buyback authorization to added: about $1.5 billion removed: on September 24, added: of buyback authorization remained at the end of Q3 2026. As of removed: Jul 4, added: Oct 3, 2026.
- Checkpoints
- Oct 30, 2026: Q3 2026 results: margins and the 2026 outlook. removed: Pending. added: Failed. Watch: Core operating margin near or above 5% and a held or raised 2026 outlook pass; a cut to the outlook because of lower production or tariffs fails. removed: Feb added: Outcome: Core operating margin was 4.4%, and Lear kept its core operating earnings outlook but cut its 2026 sales and free cash flow outlooks because of lower production on key platforms. Jan 30, 2027 (estimate): Q4 2026 results and 2027 outlook. Pending. Watch: 2026 free cash flow in the removed: $590 added: $565 million to removed: $690 added: $665 million range and a 2027 outlook with higher margins pass; lower margins or cash flow fail.
- Recent events
- Oct added: 30, 2026: Lear reported Q3 2026 results. Sales rose 2% to $5.8 billion while global production fell about 2% on a Lear sales-weighted basis. Core operating earnings rose 6% to $256 million, or 4.4% of sales, and adjusted EPS rose 33% to $3.71. Free cash flow was $158 million. Lear bought back $175 million of shares and reached its full-year target of $350 million. It kept its 2026 outlook of $1,080 million to $1,200 million of core operating earnings, but cut its sales outlook to $23,350 million to $23,750 million and its free cash flow outlook to $565 million to $665 million because of lower production on key platforms. It won new complete seat awards, including its largest in India with Mahindra & Mahindra. Oct 19, 2026: Lear said that its CFO, Jason Cardew, will resign as CFO on February 28, 2027, and retire at the end of 2027. Jared Fedele, Vice President of Finance for Seating and E-Systems, who joined Lear in 2003, becomes CFO on March 1, 2027. Oct 6, 2026: Lear said that it will hold its Q3 2026 earnings call on October 30, 2026. Sep 24, 2026: Lear's Board increased the share buyback authorization to $1.5 billion and extended it to December 31, 2029. At the end of Q2 2026, about $600 million was left on the old authorization. Jul 31, 2026: Lear reported Q2 2026 results and raised the midpoints of its 2026 outlook. Sales rose 3% to $6.2 billion, core operating earnings rose 7% to $313 million, and adjusted EPS rose 23% to $4.28. Free cash flow was $288 million, and Lear bought back $100 million of shares. The new 2026 outlook is $23,540 million to $24,010 million of sales and $1,080 million to $1,200 million of core operating earnings. Jul 1, 2026: In the joint review of the USMCA trade agreement, the United States declined to extend the agreement for another 16-year term in its current form. Lear said that this starts yearly reviews that could end the agreement in 2036 if no extension is agreed. May 1, 2026: Lear reported Q1 2026 results. Sales rose 5% to $5.8 billion, and adjusted EPS rose 24% to $3.87, the highest since 2019. Lear won new wire awards for General Motors' full-size SUVs and with Chinese car makers, and it launched seats for GM's full-size SUVs and trucks in Orion, Michigan. It bought back $75 million of shares.