(Adds S&P analyst "strong buy" opinion, CEO comments on
conference call, updates share price)
By Bernie Woodall
DETROIT, July 25 Lear Corp, maker of
auto seats and electrical power systems, on Friday exceeded Wall
Street's earnings expectations for the second quarter and
increased its full-year outlook, sending its shares up as much
as 5 percent.
The stronger-than-expected results came despite weakness in
South America and flat margins in the company's important
Excluding one-time items that were primarily restructuring
costs, Lear earned $2.12 per share, above the $1.97 expected by
analysts polled by Thomson Reuters I/B/E/S.
Standard and Poor's on Friday raised its opinion on Lear to
"strong buy" from "buy." Efraim Levy, analyst with S&P, said
that was because of Lear's ability to return cash to investors
while investing for future growth and taking market share gains.
Revenue rose 11 percent to $4.59 billion, exceeding
expectations of $4.44 billion, against the backdrop of auto
industry production growth of 3 percent in the second quarter.
Profit margins for the suburban Detroit company rose to 6
percent from 5.4 percent a year earlier. Margins in the
electrical systems business were 12.5 percent, up from 9.7
percent, but dipped in the larger seating business to 5.7
percent from 5.8 percent.
During a conference call with analysts, Chief Executive
Officer Matt Simoncini said electrical systems business sales
will slip slightly in the second half of the year, partly
because of cyclical summer auto plant shutdowns in Europe.
Sales in the company's Europe and Africa business, $1.83
billion, accounted for 40 percent of the total, followed by
North America at $1.74 billion, or 38 percent. Asian sales of
$774.3 million accounted for 17 percent, and South America had
$237.7 million, or 5 percent.
Sales rose 16 percent in Europe and Africa, 12 percent in
North America and 10 percent in China but fell 13 percent in
Lear joined other automotive-related companies in
experiencing a fall in South American business as countries such
as Brazil, Argentina and Venezuela are going through difficult
Simoncini told analysts that the company should be able to
near break-even in South America for the second half of the
year, provided the industry is able to correct come overcapacity
Net income for the quarter rose to $148.5 million, or $1.81
per share, from $137.3 million, or $1.60 per share, a year
The company said it expected sales for the year to range
from $17.6 billion to $17.9 billion. It had previously forecast
$17.2 billion to $17.7 billion.
Lear said it expected core operating earnings of $975
million to $1.025 billion, up from a previous range of $935
million to $985 million.
In afternoon trading, Lear shares were up 3.2 percent to
$98.82 on the New York Stock Exchange after trading as high as
$100.58 in the morning.
(Reporting by Bernie Woodall; Editing by Lisa Von Ahn and Grant