Morningstar | Lear Positioned for Growth From Seating and Proliferation of Automotive Electronics
We believe Lear's revenue will grow in excess of increases in annual worldwide light vehicle production. The company is well-positioned to capitalize on several trends in the global automotive industry, including automakers' focus on high-quality interiors, premium-vehicle segment growth, and the proliferation of automotive electronics. Lear competes within the markets for vehicle seating and automotive power and electric signal management. A culture of continuous innovation, high switching costs for customers, highly integrated engineering relationships with customers, and lengthy vehicle programs provide Lear with sticky market shares.The premium-vehicle segment leads the way in the proliferation of electrical circuits and electronic devices. All-electric and electric hybrid vehicles also contain higher power-management content, the production of which is being driven by more stringent fuel economy and emissions regulations. Additionally, premium vehicle seating contains more features and use higher quality materials, commanding higher pricing. Lear is the global leader in premium seating.Vehicle propulsion and dynamics, which at one time were mechanically, hydraulically, and vacuum-driven, have become electronic, requiring electrical power, computer processing, and signal processing to communicate and interact with other vehicle systems. Hybrid powertrains require more robust electrical architecture to support the power consumption of the battery-driven electric motor. Vehicle autonomy exacerbates the need for more complex electrical and electronic architectures.Lear is the number-two company in the global market for overall seating, but management believes it is the global leader in luxury- and performance-vehicle seating. We estimate that the company has the fourth-largest market share in the electrical segment. Even though there is limited synergy between the two sides, we think Lear is well-positioned with seating and electrical architecture to capitalize on global growth in premium vehicles, bolstering our thesis that revenue should outpace global growth in worldwide vehicle production.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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