Market Overview

Goldman Sachs Buckles In As Lear Growth Accelerates, Upgrades To Neutral

Goldman Sachs Buckles In As Lear Growth Accelerates, Upgrades To Neutral
Related LEA
KeyBanc Looks For Winners And Losers In The Auto Parts Space
Benzinga's Top Upgrades, Downgrades For December 11, 2018
Deutsche Bank warms up to auto (Seeking Alpha)

Lear Corporation (NYSE: LEA) has consistently beaten earnings estimates and increased its share value 60 percent since Goldman Sachs first assigned a Sell rating in 2016.

Now the firm is updating its outlook. 

The Rating

Goldman Sachs’ David Tamberrino upgraded Lear to Neutral and raised the six-month price target from $162 to $187.

The Thesis

Lear's fourth-quarter earnings beat and atypical, favorable inflection between 2018 and 2019 are encouraging, Tamberrino said in a Tuesday note.

“Overall, LEA’s continued solid execution, strength in new business wins and expansion into more secular growth areas (connectivity and vehicle electrification) of auto tech likely continue to drive benefits to bottom line EPS growth and FCF generation,” the analyst said. 

The previous bearish rating was based on expectations of revenue and margin stagnation driven by competition from Adient PLC (NYSE: ADNT), the market leader in vehicle seating.

Adient is now struggling in its turnaround and Lear's backlog growth indicates unexpected new business, Tamberrino said, adding that he expects free cash flow to grow with revenue in 2018. 

“However, we are not buyers here as we still believe the North America cycle is at a peak, that the favorable mix-shift to crossovers/SUVs slows and given NAFTA risk associated with LEA’s manufacturing footprint."

Price Action

At the time of publication, shares were trading down 0.19 percent at $194.91. 

Related Links:

Ford, GM Among The Top UBS Value Plays For 2018

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

Latest Ratings for LEA

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

View More Analyst Ratings for LEA
View the Latest Analyst Ratings

Posted-In: David Tamberrino Goldman SachsAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga


Related Articles (LEA + ADNT)

View Comments and Join the Discussion!

Latest Ratings

View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
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.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Clouds And Likes: Microsoft And Facebook On Earnings Docket

Stryker's Q4 Earnings: A Preview