Lear posts profit on strength outside N. America
CHICAGO (Reuters) - Auto parts maker Lear Corp (LEA.N), whose shareholders rejected a buyout in July, posted a quarterly profit on Thursday as new business globally and restructuring offset lower production in North America.
Lear also said near-term business conditions were relatively stable, though automotive industry conditions remain challenging, particularly in North America.
"We continue to recommend buying Lear on valuation and what seems like solid operating performance," J.P. Morgan analyst Himanshu Patel said in a note to clients, adding that "an increasingly uncertain second-half industry volume outlook" tempered near-term enthusiasm toward the entire sector.
Lear reported net income of $123.6 million, or $1.58 per share, in the second quarter, compared with a net loss of $6.4 million, or 10 cents per share, a year earlier.
Excluding restructuring and other charges, Lear earned $1.95 per share, while analysts on average expected earnings of 94 cents per share, according to Reuters Estimates.
The results beat expectations but not as much as might be expected because of a low tax rate and other expenses, CRT Capital Group analyst Kirk Ludtke said.
Lear, which produces automotive seating and electronics, completed the sale of its interiors business earlier this year. Shareholders last month rejected a $37.25 per share bid from billionaire Carl Icahn's American Real Estate Partners ACP.N, the company's biggest shareholder.
Net sales dropped 13.6 percent to $4.16 billion due to the divestment of the interiors unit and lower North American vehicle production, but sales from continuing operations were up year over year, Lear said.
Analysts on average expected Lear to report sales of $3.95 billion, according to Reuters Estimates.
Lear and other U.S. auto parts makers have been pressured by market share losses at their U.S.-based automaker customers in recent years. Revenue in its core business was down in North America but up in Europe and the rest of the world.
Lear has been cutting plants and shifting production to lower-cost regions in addition to divesting the money-losing interiors unit to the International Automotive Components Group, a joint venture led by billionaire Wilbur Ross. Lear took a stake in that joint venture.
Operating margins improved in seating due to restructuring and new business mainly outside North America, Lear said. Operating margins fell in electronics due to unfavorable net pricing, lower North American volume and other factors.
Lear raised its full-year outlook for sales excluding the interiors business by $200 million to about $15 billion, mainly due to the strength of the euro and increased production outside North America.
The Southfield, Michigan-based company left its outlook for 2007 core operating earnings unchanged at $600 million to $640 million, but said it now expects earnings at or near the high end of that range.
The company expects $100 million of total restructuring costs in 2007. It also pared its capital spending outlook by $15 million to about $235 million for the year and said it expects free cash flow of about $275 million.
Lear shares closed at $33.37 Wednesday on the New York Stock Exchange. Through Wednesday, the shares were up 13 percent in 2007, while the Dow Jones U.S. automobiles and parts index .DJUSAP was up less than 10 percent.
