• Revenue: $5.6 billion in the third quarter.
• Core Operating Earnings: $257 million, representing 4.6% of net sales.
• Adjusted Earnings Per Share: $2.89, a 1% increase.
• Operating Cash Flow: $183 million in the third quarter.
• Free Cash Flow: $51 million.
• Share Repurchases: $209 million worth of shares repurchased in the quarter.
• Dividends Paid: $43 million.
• Seating Segment Sales: $4.1 billion, a 4% decrease from the previous year.
• E-Systems Segment Sales: $1.5 billion, a 2% decrease from the previous year.
• Global Production Decrease: 5% compared to the same period last year.
• Full Year Revenue Outlook: Approximately $23 billion.
• Full Year Core Operating Earnings Outlook: Approximately $1.07 billion.
• Full Year Operating Cash Flow Outlook: Approximately $1.14 billion.
• Full Year Free Cash Flow Outlook: $560 million.
• Share Count Reduction: More than 4.5% year-to-date.

• Warning! GuruFocus has detected 5 Warning Signs with LEA.

Release Date: October 24, 2024

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

Positive Points

• Lear Corp (NYSE:LEA) reported $5.6 billion in revenue for Q3 2024, outperforming the market by 3 percentage points.
• The company achieved a 1% increase in adjusted earnings per share, driven by its share repurchase program.
• Lear Corp (NYSE:LEA) secured significant new business awards in China, particularly with domestic automakers like BYD and Xiaomi.
• The launch of the ComfortFlex module with Volvo has been successful, reducing thermal comfort part numbers by 50% and improving customer experience.
• Lear Corp (NYSE:LEA) continues to lead in the JD Power US seat quality and satisfaction study, winning more awards than any other seat supplier.

Negative Points

• Global vehicle production decreased by 5% in Q3 2024, impacting Lear Corp (NYSE:LEA)'s sales.
• The company revised its full-year revenue outlook downward due to lower vehicle production volumes.
• Lear Corp (NYSE:LEA) faces challenges with delayed sourcing activity and slower new business sourcing, particularly in North America and Europe.
• The backlog for 2024 was reduced from $1.2 billion to $885 million due to lower volumes and delayed launches.
• Lear Corp (NYSE:LEA) anticipates a significant reduction in its 2025 backlog, driven by lower volumes on key platforms.

Q & A Highlights

Q: With the implied fourth quarter guide, it looks like you've taken a pretty punitive view on fourth quarter production. Is this specific to your customers or platforms, and what are your early indications for 2025? A: (Jason Cardew, CFO) The fourth quarter did deteriorate significantly, especially in Europe, where we see a 19% year-over-year decline. For 2025, we will provide more details in our fourth-quarter earnings call, but sourcing activity has been slower due to customers rethinking powertrain strategies and cost efficiencies.

Q: Are you seeing a lot of discussion about plan A and plan B bids in the RFI process, especially concerning China and Taiwan content? A: (Raymond Scott, CEO) We have seen dual design or dual source solutions, particularly around electronic components. The RFIs are more focused on different architectural designs and battery layouts, which are taking longer as customers assess various scenarios.

Q: How far can automation go in reducing labor costs, especially with the shift from Mexico to Honduras? A: (Raymond Scott, CEO) We aim for a lights-out scenario in manufacturing, leveraging our in-house capabilities for automation. This approach reduces capital costs by 30-40% and enhances quality and efficiency. Automation is key, especially in labor-intensive areas like cut and sew and wiring.

Q: Can you provide more detail on the expected growth over market in Seating and E-Systems over the next two to three years? A: (Jason Cardew, CFO) Despite near-term uncertainties, we are confident in achieving 4 points of growth over market in Seating and 6 points in E-Systems long-term, driven by conquest opportunities and a strong pipeline.

Q: Regarding Lear's China revenue mix, is there a similar consolidated versus JV breakout for your 2027 target, and how do margins compare between domestic OEMs and legacy business? A: (Jason Cardew, CFO) We presented a combined number for 2027 due to potential changes in JV relationships. (Raymond Scott, CEO) Our strong relationships and innovative technology have driven growth with Chinese domestic OEMs, and we expect continued expansion both within and outside China.

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