Lear (LEA 171.32, -3.47, -2.0%) is a leading supplier of automotive seating systems and electrical systems, which counts Ford (F 12.03, -0.16, -1.3%) and General Motors (GM 45.30, -1.18, -2.5%) among its largest customers. Earlier today, Lear reported its third quarter results -- its best ever third quarter results, surpassing analysts' average expectations by a wide margin-- yet its stock has taken a seat in today's action.
The lackluster response makes little sense on the surface of things when also considering that Lear raised its full-year outlook. However, it makes more sense knowing shares of LEA had risen 21% since August 28, riding a wave of bullish enthusiasm that took the stocks of Ford and General Motors up 13% and 31%, respectively, over the same period.
In brief, there was a lot of good news priced into Lear already, and to the company's credit, it provided a lot of good earnings news with its actual results.
Third quarter sales jumped 10.1% to $4.98 billion, adjusted earnings per share surged 24% to $3.96, and net cash from operations increased 23% to $339 million while free cash flow improved 16% to a record $182.8 billion.
Things would have been even better if business in North America, which saw lower production volumes, was stronger. Net sales for that region slipped 2.0% to $1.82 billion, yet that was offset by sales increases in Europe and Africa, Asia, and South America.
Overall, net sales for the core Seating segment increased 10.1% to $3.87 billion and jumped 9.8% to $1.11 billion for the Electrical Systems segment.
Energized by its third quarter performance, Lear raised its full-year outlook. Sales for 2017 are expected to be approximately $20.4 billion, up $400 million from the prior outlook, and core operating earnings are anticipated to be about $1.7 billion, up $50 million.
The full-year outlook, Lear said, is predicated on a global industry production assumption of 93.4 million vehicles, up 2% year-over-year, and an average exchange rate of $1.12/Euro for the year.