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Will Lear (LEA) Pull Off a Surprise this Earnings Season?


Lear Corporation LEA is set to report first-quarter 2017 results, before the opening bell on Apr 26. The company has beat earnings estimates in all the trailing four quarters with an average positive earnings surprise of 11.70%. Let’s see how things are shaping up for this announcement.

Lear Corporation Price and EPS Surprise

Lear Corporation Price and EPS Surprise | Lear Corporation Quote

Factors to Consider

Lear expects 2017 sales to be better than 2016. The company has projected sales of $19.5 billion and core operating earnings of about $1.6 billion, compared to $18.6 billion and $1.5 billion in 2016, respectively. The company expects vehicle production in Europe and Africa, and China to improve 1% and 3%, respectively, year over year in 2017. Adjusted net income is also expected to be $1.1 billion in 2017, up from the $1 billion recorded in 2016.

Lear increased its authorized share repurchase program to $1 billion and extended the repurchase period to Dec 31, 2019. Moreover, the company has hiked its quarterly cash dividend on the common stock by 67%, increasing it from 30 cents to 50 cents per share.

Earnings Whispers

Our proven model does not conclusively show that Lear is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below:

Zacks ESP: The Earnings ESP for Lear is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate stand at $3.95. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Lear carries a Zacks Rank #2 which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Price Performance

In the last three months, share price of Lear increased 19.3% while the Zacks categorized Auto Manufacturers-Foreign industry saw a 14.6% increase. The company benefitted from a raised 2016 guidance and the signing of a strategic partnership.

Stocks to Consider

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Cooper Tire & Rubber Company CTB has an Earnings ESP of +14.49% and a Zacks Rank #3. The company is slated to report first-quarter 2017 results on Apr 27. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ferrari N.V. RACE has an Earnings ESP of +1.92% and a Zacks Rank #3. The company’s first-quarter 2017 financial results are expected for release on May 4.

General Motors Company GM has an Earnings ESP of +4.86% and a Zacks Rank #3. The company is scheduled to report first-quarter 2017 financial numbers on Apr 28.

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