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Lear Corporation Stock Upgraded (LEA)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK (TheStreet) -- Lear Corporation (NYSE:LEA) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

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Highlights from the ratings report include:

  • LEA's debt-to-equity ratio is very low at 0.27 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.07, which illustrates the ability to avoid short-term cash problems.
  • LEAR CORP's earnings per share declined by 12.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, LEAR CORP increased its bottom line by earning $5.07 versus $4.05 in the prior year. This year, the market expects an improvement in earnings ($5.25 versus $5.07).
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 7.3%. Since the same quarter one year prior, revenues slightly dropped by 0.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, LEA has underperformed the S&P 500 Index, declining 17.97% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
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Lear Corporation designs, manufactures, assembles, and supplies automotive seat systems, electrical distribution systems, and related components primarily to automotive original equipment manufacturers. It operates in two segments, Seating and Electrical Power Management Systems (EPMS). The company has a P/E ratio of 8.6, equal to the average automotive industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Lear has a market cap of $4.02 billion and is part of the consumer goods sector and automotive industry. Shares are up 3% year to date as of the close of trading on Thursday.

You can view the full Lear Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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