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

Core Viewpoint - Lear Corp. (LEA) has experienced a significant decline in share price, dropping 12.4% over the past six months, underperforming both the Zacks Auto, Tires and Trucks sector and the Zacks Automotive – Original Equipment industry [1][4]. Group 1: Performance and Challenges - Lear's performance has been negatively impacted by substantial cuts in electric vehicle (EV) production volumes by Original Equipment Manufacturers (OEMs), resulting from an industry-wide slowdown and demand uncertainty [4][5]. - The company has faced delayed EV launches and canceled programs, which have further hindered growth prospects and led to a backlog reduction for 2025 [4][6]. - Declining volumes on key platforms in China, such as the Buick Regal, BMW X3 and iX3, and Volvo XC40, have also contributed to the company's poor performance [5]. Group 2: Restructuring Efforts - In response to these challenges, Lear has initiated restructuring efforts, including the closure or sale of 13 facilities, which represents a 4% reduction in total facilities [6]. - The company plans to close or sell an additional five facilities, primarily in Europe, due to excess capacity, although these efforts may incur costs and disrupt short-term profitability [6]. Group 3: Financial Guidance for 2025 - Lear projects its full-year 2025 net sales to be between $21.88 billion and$22.88 billion, indicating a decrease of 4% at the midpoint compared to 2024 [7]. - Core operating earnings are expected to range from $915 million to$1.175 billion, reflecting a year-over-year decrease of 5% at the midpoint [7]. - Operating cash flow is anticipated to be between $1.06 billion and$1.26 billion, while free cash flow is projected to be in the range of $430 million to$630 million [8]. Group 4: Earnings Estimates - The Zacks Consensus Estimate for LEA's first-quarter 2025 EPS is $2.90, indicating a year-over-year decline of 8.8$3.26, reflecting a year-over-year decline of 9.4% [10]. - The consensus estimates for LEA's 2025 and 2026 EPS have decreased by 2.63% and 1.12%, respectively, now pegged at $12.94 and$14.97 [10]. Group 5: Investment Outlook - Given the multiple headwinds and weak outlook for 2025, Lear's stock is currently considered unattractive for investors [11].