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Not Much Runway For Lear Shares To Soar Higher; Buckingham Goes Neutral

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Not Much Runway For Lear Shares To Soar Higher; Buckingham Goes Neutral
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Analysts at the Buckingham Research Group consider Lear Corporation (NYSE: LEA) to be "one of the best" auto supplier companies in the sector yet at the same time the stock can no longer be considered a buy. The firm's Joseph Amaturo downgrades Lear's stock rating from Buy to Neutral with an unchanged $175 price target as continued upside in the stock is unlikely.

For years investors were encouraged to "aggressively" buy Lear's stock and those who did so have been rewarded, Amaturo commented in his downgrade note. Yet at this point, the stock's valuation needs to be put in perspective although there is no reason to believe there are any negative near-term catalysts.

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In fact, a notable catalyst in the form of a spin-off of the company's Electronic System is unlikely to boost shares, Amaturo continued. Specifically, the analyst estimates a 5 percent likelihood of this happening and even if it were to occur, any benefit is "already somewhat priced into shares."

Meanwhile, the entire automotive production cycle is showing signs of peaking as the rate of growth both in North America and globally is "starting to abate," the analyst added. While Lear has the necessary resources and management team to show above average growth in not-so-hot auto market the fact is the stock's risk to reward profile is "balanced."

Bottom line, the downgrade is strictly due to valuation concerns alone and not a sign of poor earnings report for the third quarter or full fiscal year on the horizon.

Related Links:

Lear Shares Downgraded To Underweight Amid Weaker-Than-Expected US Auto Sales Forecast

Lear Receives Another Bullish Rating Following Months Of Underperforming The S&P 500
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Image Credit: By Dwight Burdette (Own work) [CC BY 3.0 (http://creativecommons.org/licenses/by/3.0)], http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons">via Wikimedia Commons

Latest Ratings for LEA

DateFirmActionFromTo
Dec 2018Deutsche BankInitiates Coverage OnBuy
Dec 2018KeyBancInitiates Coverage OnOverweight
Dec 2018JefferiesInitiates Coverage OnBuy

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Posted-In: auto auto sector Auto Suppliers Joseph AmaturoAnalyst Color Downgrades Analyst Ratings Best of Benzinga

 

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