Lear Falls 12% in 6 Months: Here's Why You Should Sell the Stock

Lear Corp. LEA shares have plunged 12.4% over the past six months, underperforming the Zacks Auto, Tires and Trucks sector’s appreciation of 16.1% and the Zacks Automotive – Original Equipment industry’s return of 2%.Lear’s subpar performance can be attributed to significant cuts in EV production, delayed program launches, declining volumes on key platforms and disruptions from ongoing restructuring efforts.Six-Month PerformanceImage Source: Zacks Investment ResearchLower EV Production & Delayed Launches Hurt LEA’s ProspectsLear's growth and profitability have been impacted by multiple headwinds. One of the biggest challenges is the significant cuts to EV production volumes by Original Equipment Manufacturers (OEMs) due to an industry-wide slowdown and demand uncertainty. Delayed EV launches and canceled programs have further affected its growth prospects. Slower sourcing activity for new programs in 2024 has led to a backlog reduction for 2025, limiting LEA’s top-line growth for the year.Declining volumes on key Lear platforms in China, including the Buick Regal, BMW X3 and iX3, and Volvo XC40, have been further weighing on the company’s performance.To address these issues, Lear has undertaken restructuring efforts, closing or selling 13 facilities and reducing its total facilities by 4%. LEA plans to close or sell five more facilities, primarily in Europe, due to excess capacity. However, these restricting initiatives are expected to come with associated costs and disruptions, impacting short-term profitability.LEA’s Not So Rosy Guidance for 2025Lear projects its full-year 2025 net sales in the band of $21.88-$22.88 billion, which at its midpoint indicates a decrease of 4% compared to 2024. Excluding the impact of foreign exchange, commodities, acquisitions and divestitures, LEA expects revenues to be down 2%.Core operating earnings are anticipated to be in the range of $915 million to $1.175 billion, implying a year-over-year decrease of 5% at the midpoint.Operating cash flow is projected to be between $1.06 billion and $1.26 billion compared with $1.12 billion as of Dec. 31, 2024. Lear anticipates FCF in the band of $430-$630 million compared with $561.4 million at the end of 2024. Capital spending is expected to be approximately $625 million. In 2024, the total capital spending was $558.7 million.In 2025, Lear expects approximately $230 million of net new business compared to the $800 million expected at the start of 2024. The reduction is primarily due to lower production assumptions for various vehicles, including the RAM Charger, Volvo EX90, Polestar 3 and several GM EVs, as well as the launch delay of the RAM REV.LEA’s Earnings Estimates Indicate YoY DeclineThe Zacks Consensus Estimate for LEA’s first-quarter 2025 EPS is currently pegged at $2.90, implying a year-over-year decline of 8.8%.The Zacks Consensus Estimate for LEA’s second-quarter 2025 EPS is currently pegged at $3.26, implying a year-over-year decline of 9.4%.The consensus mark for LEA’s 2025 and 2026 EPS has moved south 2.63% and 1.12%, respectively, in the past seven days and is currently pegged at $12.94 and $14.97, respectively.ConclusionGiven that Lear is suffering from several headwinds and has a weak outlook for 2025, the stock is not attractive for investors in the near term.LEA currently carries a Zacks Rank #4 (Sell), suggesting that it may be wise for investors to stay away from the stock for the time being.Key Picks to ConsiderIf you are interested in investing in this space, consider stocks like Dana DAN, Allison Transmission Holdings ALSN and Custom Truck One Source CTOS. While DAN currently sports a Zacks Rank #1 (Strong Buy), ALSN and CTOS carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for DAN’s 2025 earnings implies 79.17% growth on a year-over-year basis.The Zacks Consensus Estimate for ALSN’s 2025 earnings implies 12.17% year-over-year growth.The Zacks Consensus Estimate for CTOS’ 2025 earnings implies 75% year-over-year growth.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Lear Corporation (LEA): Free Stock Analysis Report Dana Incorporated (DAN): Free Stock Analysis Report Allison Transmission Holdings, Inc. (ALSN): Free Stock Analysis Report Custom Truck One Source, Inc. (CTOS): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks