Morningstar | Lear Cuts 2019 Guidance; Maintaining $122 Fair Value Estimate
Narrow-moat rated Lear, supplier of seating, electrical, and electronic systems to the global auto industry, citing "continued declines in industry production volumes and other macroeconomic headwinds, including continued weakening of global currencies against the U.S. dollar," cut full-year 2019 guidance. Revenue guidance is now in a range of $19.8 billion-$20.3 billion, down from the prior range of $20.9 billion-$21.7 billion. Lear expects core operating earnings (EBIT adjusted for special items) to be within a range of $1.35 billion-$1.45 billion, dropping $250 million from the prior guidance of $1.6 billion-$1.7 billion. The stock reacted with a 4% decline, resulting in our star rating improving to 3 stars from 2 stars. Even so, Lear shares trade a slight 6% premium to our $122 fair value estimate.We lowered our 2019 revenue estimate from $21.2 billion to $19.8 billion and adjusted the EBIT estimate to $1.38 billion from $1.69 billion. This resulted in a $14.45 per-share earnings estimate (before special items), down from our prior EPS estimate of $18.45. Our fair value estimate would have been $124 owing to the time value of money since our last update, but the changes in our Stage I forecast offset the increase, leaving our fair value estimate unchanged at $122.
Lear is a supplier to the automotive industry. The company supplies seating, electrical distribution systems and electronic modules, as well as related sub-systems, components and software, to automotive manufacturers. The company has two segments: Seating, which consists of the design, development, engineering, just-in-time assembly and delivery of seat systems, and the design, development, engineering and manufacture of seat components; and E-Systems, which consists of the design, development, engineering and manufacture of electrical distribution systems, and electronic control modules, electrification products, connectivity products and software solutions for the cloud, vehicles and mobile devices.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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