DETROIT, April 25 Lear Corp posted a
stronger-than-expected quarterly profit on Thursday and, under
pressure from two shareholders, set an accelerated $800 million
stock buyback program.
The maker of auto seats and electrical power systems also
raised its full-year production forecasts across all regions and
affirmed its outlook for 2013 sales.
"We were surprised by the magnitude of the upside and
particularly encouraged by the margin beats in each segment,"
Morgan Stanley analyst Ravi Shanker said in a research note.
However, he said the focus was the share buybacks, which he
called "another layer of icing on that very large cake."
Shanker said some investors might wonder why Lear did not
raise its outlook for the year after the stronger-than-expected
first-quarter results, but that conservative approach is typical
of the company.
Net income attributable to Lear fell 19 percent to $108.5
million, or $1.13 a share, in the first quarter from $134.1
million, or $1.32 a share, a year earlier.
Excluding restructuring charges and other one-time items,
Lear earned $1.30 a share, 20 cents above what analysts polled
by Thomson Reuters I/B/E/S had expected. Shanker said a
lower-than-expected tax rate added 4 cents to the profit.
Revenue rose 8 percent from last year to $3.95 billion,
while analysts expected $3.71 billion.
Lear said sales rose 3 percent in the seating business and
jumped 25 percent in the electrical power management systems
As part of a deal with two shareholders, the Southfield,
Michigan-based company said on Thursday that it had entered into
an agreement with Citibank to buy back $800 million of its
stock. Lear said it would fund the deal and retire about 12
million shares within the next week.
Lear said it would acquire the shares under the previously
announced repurchase program within 11 months and fund the
transaction with cash on hand.
Earlier in April, Lear avoided a proxy battle with investors
Marcato Capital Management LLC and Oskie Capital Management LLC
by agreeing to increase and quicken the pace of its share
buyback program and add a board member.
As a result of that pressure, Lear's board in April also
authorized an additional $750 million in share repurchases,
bringing the total available buyback authorization to $1.55
billion - about one-third of Lear's current market
The company said it still expected 2013 full-year sales of
$15 billion to $15.5 billion. It forecast adjusted earnings of
$420 million to $455 million.
Analysts are expecting 2013 sales of $15.29 billion and
earnings of $4.93 a share.
However, Lear raised its forecasts for industry vehicle
production in each region. It now sees North American production
of 16.1 million vehicles in 2013, up 3 percent from the prior
Lear forecasts production in Europe and Africa of 19.1
million vehicles, up 1 percent from before. It also raised its
forecast for China production by 1 percent to 18.8 million
The first quarter included $17 million in restructuring
charges, and Lear said it expected to incur another $34 million
for actions started after the end of March.