• Revenue: $23.3 billion for 2024.
• Core Operating Earnings: $1.1 billion, or 4.7% of net sales for 2024.
• Adjusted Earnings Per Share: $12.62, a 5% increase from last year.
• Operating Cash Flow: $1.1 billion for 2024.
• Free Cash Flow: $561 million for 2024.
• Share Repurchase: $400 million worth of shares repurchased in 2024.
• Global Headcount Reduction: Reduced by 15,000, with a 9% reduction in Seating and 8% in E-Systems.
• Seating Segment Sales: $17.2 billion, a 2% decrease from 2023.
• Seating Segment Adjusted Earnings: $1.1 billion, with a 6.5% operating margin.
• E-Systems Segment Sales: $6.1 billion, a 3% increase from 2023.
• E-Systems Segment Adjusted Earnings: $310 million, with a 5.1% operating margin.
• 2025 Revenue Outlook: $21.9 billion to $22.9 billion.
• 2025 Core Operating Earnings Outlook: $915 million to $1.175 billion.
• 2025 Free Cash Flow Outlook: $530 million at the midpoint of guidance.
• Share Repurchase Authorization Remaining: $1.1 billion through December 31, 2026.

• Warning! GuruFocus has detected 4 Warning Signs with LEA.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Lear Corp (NYSE:LEA) generated $23.3 billion in revenue for 2024, with core operating earnings of $1.1 billion.
• The company achieved a 5% increase in adjusted earnings per share, driven by share repurchase programs and higher earnings.
• Lear Corp (NYSE:LEA) surpassed its share repurchase target by buying back $400 million worth of shares, exceeding the $325 million target.
• The company improved E-Systems' margins for the second consecutive year, reaching over 5%.
• Lear Corp (NYSE:LEA) secured significant new business awards with Chinese OEMs, including BYD, Geely, and Xiaomi, contributing to growth in the Chinese market.

Negative Points

• Global production was down 1% on a Lear sales-weighted basis, with declines in North America and Europe.
• Lear Corp (NYSE:LEA) experienced a 2% decline in sales for the fourth quarter of 2024, reflecting lower volumes on Lear platforms.
• The company's 2025 revenue outlook indicates a decrease of 4% compared to 2024, with core operating earnings expected to decline by 5%.
• Lear Corp (NYSE:LEA) faced challenges with lower-than-expected volumes on several EV programs, impacting its sales backlog.
• The company anticipates continued restructuring costs of approximately $175 million to support footprint rationalization and cost reduction efforts.

Q & A Highlights

Q: Can you discuss the dynamics of competition in the Seating business, particularly regarding innovation like ComfortMax and cost actions through automation? A: Ray Scott, President and CEO, explained that Lear has been strategically acquiring companies to drive efficiency and innovation in Seating. The modular approach reduces cost, weight, and complexity while improving comfort. Lear's investments in automation and digitalization allow them to offer competitive pricing while maintaining strong margins. The company is confident in its ability to retain margins and compete effectively, as evidenced by recent awards and validations with major automakers like GM and Ford.

Q: How should we think about market assumptions and potential cost-cutting if the market slows down? A: Jason Cardew, CFO, noted that Lear's market assumptions are aligned with S&P forecasts, but they are more optimistic about certain platforms like GM's full-size SUVs and JLR's Range Rover due to recent strong performance. Lear expects a weak market in Europe and North America, with decremental margins around 20%. The company is focused on offsetting lower volumes through automation and restructuring, aiming for minimal downward conversion on sales.

Q: How are you handling program cancellations and less visibility on launches with automakers? A: Ray Scott stated that Lear is negotiating commercial recoveries for lost volumes and is cautious with capital deployment. The company is more conservative in capitalizing facilities and adjusts quoting processes based on volume changes. Lear is focused on ensuring contracts cover costs and avoids over-investing in uncertain programs.

Q: What is Lear's view on the competitive landscape in E-Systems, and are there opportunities for consolidation? A: Ray Scott mentioned that industry-wide consolidation is likely, and Lear is open to opportunities that increase shareholder value. Jason Cardew added that the long-term margin target for E-Systems remains at 8%, with improvements expected from restructuring and automation investments. Lear is focused on executing its plan to build durable margins in both segments.

Q: How exposed is Lear to potential tariff increases, and what steps can be taken to mitigate costs? A: Jason Cardew clarified that Lear's imports from Mexico to the US were $2.9 billion last year, primarily in Seating and E-Systems. The company is working with customers to build inventory and mitigate near-term tariff risks. Lear's exposure to tariffs from Canada and China is minimal, and the company is actively managing its supply chain to reduce potential impacts.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.