Lear Corporation

Lear Corporation produced strong results despite continuing difficulties associated with the impact of the pandemic and semiconductor shortages, cost inflation, and a strengthening currency in the second quarter. Even though first-quarter production volumes were down, the company’s overall operating income and margins increased sequentially and it delivered an all-around beat. Lear also went on to acquire IGB, a well-known German manufacturer of active cooling, heated steering wheels, and car seat ventilation systems. This acquisition will increase Lear’s product capabilities in active cooling, complement current offerings, and provide unique thermal comfort seating options that enhance vehicle performance and packaging. The management is working hard to streamline its footprint and eliminate any extra capacity to accommodate larger volumes when the industry recovers. They currently have ample capacity within their current footprint to accommodate both the anticipated expansion in industry volumes over the ensuing years as well as their expanding backlog. Overall, we give Lear Corporation a ‘Hold’ rating with a revised target price.