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Moody’s Rated Lear Outlook to Positive with Ba1 Rating to Its Debt

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Price movement of Lear

Lear Corporation (LEA) has a market cap of $7.8 billion. LEA fell by 1.4% to close at $104.89 per share as of February 18, 2016. The price movement on a weekly, monthly, and year-to-date (or YTD) basis is 6.8%, 2.3%, and -14.6%, respectively.

At times, the stock has broken the support of all moving day averages. Currently, LEA is trading 4.0% above its 20-day moving average, 6.0% below its 50-day moving average, and 6.1% below its 200-day moving average.

The PowerShares DWA Consumer Cyclicals Momentum Portfolio (PEZ) invests 2.1% of its holdings in Lear. The ETF tracks an index of US consumer cyclical firms selected and weighted by price momentum. The YTD price movement of PEZ is -9.1% as of February 17, 2016.

The market cap of Lear’s competitors are as follows:

  • Johnson Controls (JCI) — $23.1 billion
  • Delphi Automotive (DLPH) — $18.1 billion
  • Magna International (MGA) — $14.0 billion
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Moody’s rated Lear Corporation

Moody’s Investor Service rated Lear Corporation’s outlook to “positive” from “stable” and affirmed Lear’s debt including the Corporate Family and unsecured notes at Ba1. The Speculative Grade Liquidity Rating is SGL-1.

Performance of Lear in fiscal 4Q15 and fiscal 2015

Lear Corporation (LEA) reported fiscal 4Q15 net sales of $4,724.6 million, a rise of 3.8% compared to net sales of $4,549.7 million in fiscal 4Q14. Sales of North America and Asia rose by 12.4% and 9.8%, respectively, in fiscal 4Q15, and sales of Europe and Africa and South America fell by 2.3% and 44.7%, respectively, in fiscal 4Q14.

Its net income and EPS (earnings per share) fell to $235.3 million and $3.07, respectively, in fiscal 4Q15, compared to $261.8 million and $3.24, respectively, in fiscal 4Q14.

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Fiscal 2015 results

In fiscal 2015, Lear Corporation reported net sales of $18,211.4 million, a rise of 2.7% YoY (year-over-year). Its net income and EPS rose to $745.5 million and $9.59, respectively, in fiscal 2015, compared to $672.4 million and $8.23, respectively, in fiscal 2014.

Meanwhile, its cash and cash equivalents and inventories rose by 9.4% and 11.0%, respectively, in fiscal 2015. Its current ratio and long-term debt-to-equity ratio rose to 1.4x and 0.84x, respectively, in fiscal 2015, compared to 1.3x and 0.71x, respectively, in fiscal 2014.

During fiscal 4Q15, the company repurchased ~841,000 shares of its common stock for a total of $104 million. It still has a share repurchase authorization of $513 million at the end of fiscal 4Q15.

The PE (price-to-earnings) and PBV (price-to-book value) ratios of Lear are 10.9x and 2.7x, respectively, as of February 18, 2016.

Projection

Lear Corporation (LEA) has made the following projections for fiscal 2016:

  • sales in the range of $18.5 billion–$19.0 billion
  • operating earnings in the range of $1.35 billion–$1.40 billion
  • free cash flow of ~$800 million
  • tax rate of ~28%
  • adjusted net income in the range of $855 million–$895 million
  • pre-tax operational restructuring costs of ~$70 million
  • capital spending of ~$525 million

Continue to the next part for our discussion of Boston Beer.

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