Market Overview

What Does A Potential E-Systems Spinoff Mean For Lear?

Share:
What Does A Potential E-Systems Spinoff Mean For Lear?

While there’s renewed interest in a spinoff of Lear Corporation (NYSE: LEA)’s electrical division E-Systems, the upside for such a move is already priced in, according to UBS.

Spinoffs announced at Autoliv Inc. (NYSE: ALV) and Delphi Automotive PLC (NYSE: DLPH) have left investors searching for more value-added spinoffs, analyst Colin Langan said in a Monday note.

“Not only do we believe management is not supportive of a spin, but following the 16-percent run in shares in the last 30 days (32 percent year-to-date), the spin upside appears to be already priced in,” Langan said (see his track record here).

A Lear activist unsuccessfully pushed for an E-Systems spinoff in 2015, according to UBS.

UBS downgraded Lear from Buy to Neutral on the basis of its valuation and raised its price target from $158 to $182.

The analyst firm raised its EPS estimates for 2017 from $16.45 to $16.70 and from $16.75 to $17.20 in 2018, which Langan noted is below the $17.45 consensus.

GM Truck Changeover Coming In 2018

General Motors Company (NYSE: GM)’s full-size pickup and SUV platform — a $2.1 billion contract for Lear — accounts for an estimated 10 percent of the automotive supplier’s sales, according to UBS.

GM is executing a platform changeover in 2018. When the automaker last did so, Lear’s seating margins fell by 90 basis points year over year on “rising launch cost and operational inefficiencies,” Langan said.

IHS is forecasting a 16-percent decline in year-over-year volumes for the GM changeover, creating a $350 million sales headwind, according to UBS.

Related Links: 

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

Friday's Sell-Off In Autoliv Shares Created An Opportunistic Entry Point For Long-Term Bulls

Latest Ratings for LEA

DateFirmActionFromTo
Nov 2019MaintainsOverweight
Oct 2019MaintainsNeutral
Oct 2019Initiates Coverage OnNeutral

View More Analyst Ratings for LEA
View the Latest Analyst Ratings

Posted-In: Autoliv Inc. Delphi Automotive PLCAnalyst Color Downgrades Price Target Travel Analyst Ratings General Best of Benzinga

 

Related Articles (ALV + DLPH)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
MIKStephens & Co.Downgrades7.0
SNYBarclaysDowngrades
NGVTLoop CapitalDowngrades96.0
TIFCredit SuisseDowngrades135.0
TTDNeedhamUpgrades325.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

Short Sellers Pour Into FAANG Stocks

Using Correlation To Find Stock Market Clones