Sign in

You're signed outSign in or to get full access.

LC

LEAR CORP (LEA)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue was $5.56B, down 7% year over year, while adjusted EPS was $3.12 vs. $3.18 last year; total company core operating margin improved to 4.9% on strong operational performance despite lower volumes .
  • Adjusted EPS and revenue modestly beat Wall Street consensus, with Primary EPS consensus at $2.70* (13 estimates) and revenue at ~$5.51B* (10 estimates); actual adjusted EPS $3.12 and revenue $5.56B represented beats vs. consensus* .
  • Management withdrew FY2025 guidance given tariff-related uncertainty but emphasized confidence in delivering operational improvement targets; share repurchases were paused temporarily to preserve liquidity and are expected to resume once visibility improves .
  • Segment margins improved year over year in both Seating and E-Systems (Seating adjusted margin 6.7%; E-Systems adjusted margin 5.2%), driven by efficiency gains, restructuring savings, and automation investments .
  • Awards momentum remained strong (≈$750M average annual sales in E-Systems; new seating awards with BYD, FAW, XPeng, Volvo, Hyundai) and consolidation of a China JV (BYD programs) is expected to add ~$70M to 2025 revenue .

What Went Well and What Went Wrong

What Went Well

  • Total company operating margin improved to 4.9% (vs. 4.6% in Q3'24 and 4.5% in Q4'24) on “historic” net performance, with 125 bps contribution in Seating and 155 bps in E-Systems; automation and restructuring delivered durable savings .
  • Strong commercial and award momentum: ≈$750M average annual sales awarded in E-Systems (most in any quarter in over a decade), plus ComfortFlex wins (Volvo, Hyundai) and complete seat awards with BYD, FAW, XPeng .
  • Strategic progress in China: operating control of a BYD-focused seating JV taken in April; expected ~$70M revenue contribution in 2025 .

What Went Wrong

  • Revenue declined 7% year over year to $5.56B on lower production for key Lear platforms; cash from operations was a use of $128M and FCF was -$232M due to timing of customer receipts and higher cash restructuring costs .
  • Management withdrew FY2025 guidance amid rapidly evolving tariff policies and uncertain production/mix, creating near-term visibility challenges for investors .
  • Regional production pressures: North America down 5% and Europe down 7% year over year, while China rose 12%; content mix faces potential decontenting (e.g., rear-seat entertainment) as customers manage tariff costs .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Billions)$5.584 $5.715 $5.560
GAAP Diluted EPS ($USD)$2.41 $1.61 $1.49
Adjusted EPS ($USD)$2.89 $2.94 $3.12
Core Operating Margin (% of sales)4.6% 4.5% 4.9%
Segment BreakdownQ3 2024Q4 2024Q1 2025
Seating Net Sales ($USD Billions)$4.112 $4.186 $4.151
Seating Segment Margin (%)5.9% 5.5% 5.2%
Seating Adjusted Segment Margin (%)6.4% 6.1% 6.7%
E-Systems Net Sales ($USD Billions)$1.473 $1.529 $1.409
E-Systems Segment Margin (%)4.4% 3.8% 3.9%
E-Systems Adjusted Segment Margin (%)5.0% 5.0% 5.2%
KPIsQ3 2024Q4 2024Q1 2025
Content per Vehicle - North America ($)$651 $626 $609
Content per Vehicle - Europe & Africa ($)$508 $447 $476
Net Cash from Operating Activities ($USD Millions)$183 $681 -$128
Free Cash Flow ($USD Millions)$51 $489 -$232

Guidance Changes

MetricPeriodPrevious Guidance (Feb 6, 2025)Current Guidance (May 6, 2025)Change
Net SalesFY 2025$21,875M – $22,875M Not reaffirmed due to tariff uncertainty Withdrawn
Core Operating EarningsFY 2025$915M – $1,175M Not reaffirmed Withdrawn
Adjusted EBITDAFY 2025$1,535M – $1,795M Not reaffirmed Withdrawn
Operating Cash FlowFY 2025$1,055M – $1,255M Not reaffirmed Withdrawn
Capital SpendingFY 2025≈$625M Not reaffirmed; later noted capex being dialed back as visibility evolves Withdrawn/Under review
Free Cash FlowFY 2025$430M – $630M Not reaffirmed Withdrawn
Restructuring CostsFY 2025≈$175M Restructuring investment increased by $30–$40M to accelerate savings Increased

Other corporate actions:

  • Dividend: $0.77 per share declared on May 16, 2025 (payable Jun 25, record Jun 5) .
  • Share repurchases: $25M in Q1 2025; authorization ≈$1.1B remaining; activity paused temporarily pending visibility .

Earnings Call Themes & Trends

TopicQ-2 (Q3 2024)Q-1 (Q4 2024)Current Period (Q1 2025)Trend
Tariffs/macroNoted bid/award delays, sourcing RFIs rising; footprint shifting to Honduras/N. Africa Guidance included no tariff impact; later disclosed imports composition and industry approach Guidance withdrawn; direct tariff recovery expected; gross tariff cost ≈$200M discussed; pursuing 100% recovery Uncertainty ↑
Automation (IDEA by Lear)Expanded automation, LearVUE vision systems, WIP Automation; headcount reductions progressing Target ~$75M 2025 savings, annualized $150M; facility closures; “exit run-rate” ~5% margin targeted Q1 savings: $11M automation, $12M restructuring; best net performance since Q2’21 Improving
China/domestic OEM growthGrowing with BYD, Geely, Xiaomi; target ~50% China revenue from domestics by 2027 Increased domestic mix to >37% in 2025; backlog dynamics updated Operating control of BYD JV; new seat awards for BYD/FAW/XPeng Improving
Product innovation (Seating)ComfortFlex launch with Volvo; additional awards; JD Power seat quality leadership ComfortMax validation with Ford; GM mid-size trucks adopting thermal comfort ComfortFlex awards with Volvo/Hyundai; third-party accolades (Motor Trend; PACE award – Zone Control Module) Improving
Supply chain/productionQ4 production outlook conservative; Europe weakness; inventory corrections Q4 beat aided by JLR; 2025 production assumptions detailed Q1 global production +1% YoY; NA -5%, Europe -7%, China +12%; sales-weighted -5% Mixed
Capital allocationAccelerated buybacks in 2H’24; target 80% FCF conversion 2025 plan included at least $250M buybacks $25M buybacks in Q1; temporary pause to preserve liquidity Paused near term

Management Commentary

  • “Lear delivered a solid start to 2025 by accelerating our operational improvement plans, leading to higher year-over-year margins in both segments, despite lower industry production in our largest markets.” — Ray Scott, President & CEO .
  • “This improvement was driven by historic levels of positive net performance, contributing 125 basis points to Seating and 155 basis points to E-Systems margins.” — Ray Scott .
  • “Our message to customers has been very clear, 100% of all tariffs must be recovered… Innovative designs, engineering changes and alternative sourcing options can reduce the overall tariff costs.” — Ray Scott .
  • “We are increasing our investment in restructuring to accelerate our footprint rationalization actions… while lowering our capital spending by roughly the same amount.” — Jason Cardew, CFO .

Q&A Highlights

  • Guidance withdrawal rationale: management emphasized the wide variability in production/mix outcomes (consumer response to pricing, OEM strategies on market share vs margin, evolving trade policies); second-quarter visibility improving with plans to provide an update at a June investor conference .
  • Tariff exposure and recovery: gross tariff cost ~ $200M; about half linked to Honduras wire harnesses under Section 232 (25% rate likely adjusted), with >90% already covered by customer commitments; remaining direct exposure being mitigated via design/sourcing changes; 100% recovery targeted .
  • Restructuring and automation: restructuring investment increased $30–$40M to accelerate savings; capex reduced where payback is longer, prioritizing near-term margin improvements .
  • Margin cadence and drivers: Q1 margin uplift from better-than-expected March production (Asia) and pulled-forward commercial settlements (~20 bps), plus broad-based operational performance across regions .
  • Share repurchases: paused temporarily due to uncertainty; expected to be brief with reinstatement once visibility improves .

Estimates Context

Metric (Q1 2025)Consensus*ActualSurprise*
Revenue ($USD Billions)$5.509$5.560 +$0.051*
Primary EPS ($USD)$2.70$3.12 +$0.42*
Primary EPS – # of Estimates13*——
Revenue – # of Estimates10*——

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Margin expansion trajectory remains intact despite volume/mix headwinds; Q1’25 core operating margin at 4.9% supports confidence in exiting 2025 near ~5% run-rate as operational initiatives compound .
  • Both segments demonstrated structural margin improvement (Seating adj. margin 6.7%, E-Systems adj. margin 5.2%) driven by automation and restructuring, suggesting durability even amid macro uncertainty .
  • Guidance withdrawal is primarily visibility-related (tariffs/production); near-term catalysts include clarity from OEM schedules and policy developments, plus management’s planned Q2 update in June .
  • Awards momentum and China JV consolidation underpin medium-term growth; $750M E-Systems wins and BYD JV add ($70M revenue) provide backlog support beyond 2025 .
  • Cash flow was temporarily negative on working-capital timing and restructuring; dividend maintained ($0.77/share), with buybacks paused but planned to resume on improved visibility .
  • Tariff risk management is proactive with targeted 100% cost recovery and multiple mitigation levers (design, sourcing, importer-of-record strategies), reducing downside to margins .
  • Watch for decontenting on imported components (e.g., rear-seat entertainment) as a potential mix headwind; Lear is offering alternative solutions to preserve value and content .

Additional notes:

  • No separate 8-K 2.02 item was listed; the May 6, 2025 earnings press release served as the primary source for Q1 2025 results .
  • Prior quarters covered for trend analysis: Q3 2024 press release and call , and Q4 2024 press release and call .