Lear NYSE: LEA reported higher second-quarter sales, earnings and cash flow, citing new business wins, operational improvements and continued deployment of automation initiatives. The company raised its full-year outlook for revenue, core operating earnings and free cash flow, although management pointed to continued uncertainty in China and expected second-half production-related headwinds.
Second-quarter sales increased 3% year over year to $6.2 billion, while organic sales rose 1%. Core operating earnings increased 7% to $313 million, and adjusted earnings per share rose 23% to $4.28. Operating cash flow increased 55% to $461 million, while free cash flow climbed 69% to $288 million.
President and CEO Ray Scott said the results produced record first-half revenue of more than $12 billion. Core operating earnings grew about 9% during the first half, according to the company.
Seating growth offsets mixed production trends
Lear said global vehicle production was flat in the quarter from the prior year and down less than 1% on a Lear sales-weighted basis. Production was flat in North America, while declining 2% in Europe and 4% in China.
The Seating segment generated $4.6 billion in quarterly sales, up 3% from a year earlier, including 2% organic growth. CFO Jason Cardew said new business, including the Series M6 and M7 in China, BMW iX3 in Europe and Jeep Cherokee in North America, supported the segment. Seating adjusted earnings rose 4% to $312 million, with an adjusted operating margin of 6.7%.
E-Systems sales increased 2% to $1.6 billion, but organic sales declined 2%, reflecting lower volumes on certain Lear platforms, including Volkswagen programs in China and the Ford Mustang Mach-E in North America. The segment was also affected by the build-out of Ford Escape, Focus and Lincoln Corsair programs. Still, E-Systems adjusted earnings rose to $91 million from $76 million, and its operating margin improved to 5.8% from 4.9%.
Scott said the company achieved about $2.9 billion in business awards year to date, including more than $2.3 billion in Seating and more than $500 million in E-Systems. More than half of the total awards were for new or conquest programs.
Among the notable Seating awards was a set of programs with Audi, including two conquest wins for existing European vehicles and a future North American vehicle program. The awards include complete seats and Lear’s ComfortFlex technology, while one vehicle will also use FlexAir in its third row. Cardew said the Audi business will launch toward the end of 2028, ramp through 2029 and into 2030, and represents multiple hundreds of millions of dollars in revenue. He said it is roughly 75% as large as Lear’s largest prior conquest award.
The company also cited complete-seat business with Hyundai in North America, ComfortFlex awards with BMW and a North American electric-vehicle manufacturer, and a Leapmotor complete-seat award for South American expansion. In E-Systems, Lear won a wire-harness award with BAIC and a replacement wire program with Renault that includes content previously supplied by another supplier.
Automation initiatives and cost savings
Management emphasized the role of its IDEA by Lear operating framework in improving efficiency, reducing inventories and expanding margins. Lear opened its Advanced Manufacturing Integration Center in Rochester Hills during the quarter, featuring automated manufacturing lines and digital tools across its Seating and E-Systems operations.
Scott said Lear has more than 200 automated sewing cells globally, which have reduced labor requirements by 50% in applicable operations. The company also has more than 50 automated seat-finesse cells and more than 40 end-of-line testing cells in production or deployment, together producing $14 million in annual savings.
In Germany, Lear piloted a “lights-out” shift using 12 fully automated injection molding machines at its Wismar connection systems plant. The company said it expects to launch its first production application for automated wire-taping technology next year. Scott noted that tape application accounts for nearly 20% of Lear’s direct labor in wiring.
Lear remains on track to generate $75 million in IDEA savings this year, after achieving about $35 million in the first half. It also expects restructuring savings from prior and current actions to total $80 million in 2026, having generated $50 million through the second quarter.
Raised 2026 outlook amid China concerns
At the midpoint of its updated outlook, Lear now expects 2026 revenue of approximately $23.8 billion, compared with its previous midpoint of $23.6 billion. The company raised expected core operating earnings to about $1.14 billion from $1.115 billion and lifted its free-cash-flow forecast by $40 million to approximately $640 million.
The updated production assumptions call for global industry production to decline by less than 2% on a Lear sales-weighted basis in 2026, compared with a prior assumption of a 1% decline. The revision primarily reflects lower expected production in China, partially offset by higher North American volume assumptions.
Cardew said China represents the largest variable in the company’s outlook. Lear has embedded continued weakness in Chinese domestic demand in its second-half forecast, along with a larger expected share shift from traditional automakers to Chinese manufacturers. The company now expects global customers to lose roughly 3% share to Chinese automakers this year, compared with its prior estimate of about 1.5%.
Management said revenue in the second half is expected to be lower than first-half revenue due to seasonal shutdowns, fewer production days in Lear’s fiscal calendar and planned downtime for General Motors’ full-size truck changeover. Lear forecast third-quarter sales of roughly $5.8 billion to $5.9 billion, with Seating margins in the low- to mid-6% range and E-Systems margins in the low-4% range.
Looking further ahead, Cardew said Lear expects limited growth in 2027 despite its reported backlog, partly because discontinued non-core electronics products will reduce revenue by about $235 million next year. However, he said the company sees the potential to return to historical growth above market in 2028 through 2030, with the strongest contribution from recent awards expected in 2029.
Share repurchases increased
Lear repurchased $100 million of stock during the second quarter, bringing first-half repurchases to $175 million. The company increased its full-year repurchase target to at least $350 million. Lear said it has approximately $600 million remaining under its current authorization, which runs through Dec. 31, 2026.
Cardew said the company has $3 billion of available liquidity, an average debt cost below 4%, and a weighted average debt maturity of about 11 years. Since initiating its repurchase program in 2011, Lear has repurchased $6.1 billion of shares and returned more than 85% of free cash flow to shareholders through repurchases and dividends, according to management.
About Lear (NYSE:LEA)
Lear Corporation NYSE: LEA is a global supplier of automotive seating and electrical distribution systems. The company designs, engineers and manufactures complete seat systems, seat components and power solutions for major vehicle manufacturers. Its electrical business delivers modules and components for battery management, infotainment, body and safety electronics, as well as advanced connectivity and electrification solutions.
The seating division develops lightweight, ergonomic seat structures, trim and mechanisms that address comfort, safety and environmental targets.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
Before you consider Lear, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Lear wasn't on the list.
While Lear currently has a Hold rating among analysts, top-rated analysts believe these five stocks are better buys.
View The Five Stocks Here
The AI wave will soon hit public markets with Anthropic and OpenAI set to go public later this year. However, you don't have to wait to invest. This report shows seven AI stocks that you can buy today while the big model providers get ready to go public.
Get This Free Report
