Lear (LEA) posted 3Q earnings of $1.93 a share (topping $1.88 consensus) and revenues of $4.23bn marginally missed expectations. LEA said this was the best quarter ever, with sales up 8% y/y, core earnings up 22% and EPS up 33%. LEA guided full year 2014 sales to be $17.7bn, but raised core earnings expectations from $975mm to $1,025mm up to $1,010mm to $1,040mm.
The seating segment sales were up 10% y/y and earnings for the segment were up 14% y/y. Electrical segment earnings were up 24% y/y thanks the the 20th straight quarter of y/y margin expansion.
Expected free cash flow of $450mm for 2014 is a pro forma FCF yield of 6.25%. It also bought back $103mm in shares during 3Q and still has $491mm left on its authorization -- good enough to reduce shares outstanding by 7%.
Shares are up nearly 9% over the last week.
We covered LEA last year, with shares up 50% since then. There looks to be plenty of upside left for this auto supplier of seating and electrical with its superior expected earnings growth compared to the industry average. It boasts a solid 5.6% free cash flow yield and shares are still attractively priced at 15x earnings and 5.6x ev/ebitda.