NEW YORK ( TheStreet) -- Lear Corporation (NYSE: LEA) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, poor profit margins and weak operating cash flow. Highlights from the ratings report include:
- LEA's revenue growth has slightly outpaced the industry average of 4.1%. Since the same quarter one year prior, revenues slightly increased by 3.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- LEA's debt-to-equity ratio is very low at 0.26 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 1.16, which illustrates the ability to avoid short-term cash problems.
- LEAR CORP's earnings per share declined by 8.3% 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 ($5.27 versus $5.07).
- Net operating cash flow has significantly decreased to $4.20 million or 97.27% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Auto Components industry average. The net income has decreased by 14.0% when compared to the same quarter one year ago, dropping from $156.00 million to $134.10 million.
-- Written by a member of TheStreet Ratings Staff