On Wednesday, Citi adjusted its stance on Lear Corporation (NYSE: NYSE:LEA), a leading global supplier of automotive seating and electrical systems, by reducing its price target on the company's shares. The new stock target has been set to $141, a decrease from the previous $141, while the firm has maintained a Neutral rating on the stock.
The revision follows a downturn in Lear's shares, which fell by 8% on Tuesday after the company provided a weaker than expected outlook for second-quarter margins and delivered mixed results for the first quarter. Despite the results being in line with preliminary announcements, the quality of the earnings was considered low by the analyst from Citi.
The softer outlook for the upcoming quarter has led Citi to lower its earnings estimates for Lear, positioning them further below the consensus but still within the range provided by the company. The analyst noted that while the core narrative for Lear remains unchanged, the sentiment towards the company had been overly positive, and the estimates for 2024 were too optimistic ahead of the first-quarter results.
In light of the recent share performance post-Q1 results, Citi has decided to close its previous recommendation which favored an Overweight position in Magna (TSX:MG) in contrast to an Underweight position in Lear. The analyst indicated that for a more positive view on Lear to emerge, it would be necessary for consensus estimates to adjust to more achievable levels.
The decision to lower the stock price target to $141 from $145 is attributed to these revised estimates. The Neutral rating on Lear's stock has been reaffirmed by Citi as part of this update.
InvestingPro Insights
In the wake of Citi's revised stance on Lear Corporation, real-time data and InvestingPro Tips provide additional context for investors considering the company's stock. With a market capitalization of $7.15 billion and a P/E ratio that has adjusted to 10.9 over the last twelve months as of Q4 2023, Lear appears to be trading at a low P/E ratio relative to near-term earnings growth.
This could potentially signal an undervalued stock in the eyes of some investors, especially when considering the company's position as a prominent player in the Automobile Components industry.
Revenue growth for Lear has been positive, with an increase of 12.33% over the last twelve months leading up to Q4 2023. Despite concerns over weak gross profit margins, which currently stand at 7.85%, the company has managed to maintain dividend payments for 14 consecutive years, offering a dividend yield of 2.45% as of the latest data. Moreover, analysts remain optimistic about Lear's profitability this year, with the stock having been profitable over the last twelve months.
Investors should note that the stock has experienced significant volatility, reflected in a price decrease of 12.81% over the last month, and is currently trading near its 52-week low. For those looking for comprehensive analysis and further insights, there are additional InvestingPro Tips available, which can be explored on the dedicated Lear Corporation page on InvestingPro. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription for deeper investment insights.
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