Lear's Margins Widen as E-Systems Rebound Drives Earnings Growth
Lear posted second-quarter net income of $192.8 million, up 17% from a year earlier, as its electronics segment margin nearly doubled and the company raised its full-year guidance.
Lear Corporation (LEA) reported second-quarter sales of $6,209.4 million, up 3% from $6,030.4 million a year earlier, and raised full-year guidance as margin expansion in its electronics business lifted earnings well ahead of revenue growth.
The increase reversed the flat year-over-year sales the auto-parts supplier posted in the same quarter of 2024, when revenue was essentially unchanged from 2023 at $6,030.4 million versus $6,012.4 million. Growth has since moderated but held positive, with first-quarter 2025 revenue up 5% and second-quarter revenue up 3%, following a full year of flat sales in 2024 at $23.3 billion.
Core operating earnings margin reached 5.0% of sales in the quarter, up from 4.8% a year earlier and continuing a climb from 4.2% in the third quarter of 2024 and 4.3% in the fourth. The improvement was concentrated in the E-Systems segment, where margin rose to 5.4%, or 5.8% on an adjusted basis, from 3.5% and 4.9% respectively a year earlier, and up from just 2.2% in the fourth quarter of 2024. Lear's Seating segment moved in the opposite direction, with margin narrowing to 6.2% from 6.4% while the adjusted figure held flat at 6.7%, a step back from the segment's stronger first-quarter showing of 6.3% and 6.9% adjusted.
Net income climbed 17% to $192.8 million from $165.2 million, and adjusted net income rose 16% to $217.4 million from $187.8 million, extending a recovery that saw first-quarter net income more than double year-over-year to $172.3 million from $80.7 million. Earnings per share grew faster still, up 24% to $3.79 from $3.06, with adjusted EPS up 23% to $4.28 from $3.47, helped by a reduction in diluted shares outstanding to 50.8 million from 54.1 million.
Free cash flow rose 68% to $287.8 million from $170.8 million, building on a first-quarter improvement to negative $27 million from negative $232 million a year earlier. Operating cash flow was little changed at $460.5 million against $296.2 million, but capital expenditures rose to $172.7 million from $125.4 million, a higher-spending pattern that began in the first quarter.
Regionally, South America was the fastest-growing market, with sales up 27% to $259.2 million from $203.3 million, while North America sales slipped to $2,498.4 million from $2,519.3 million. Content per vehicle in North America fell to $633 from $637, while the figure in Europe and Africa rose to $517 from $474.
Lear raised its full-year 2025 outlook, projecting net sales of $23,540 million to $24,010 million and core operating earnings of $1,080 million to $1,200 million, both above the prior-year outlook range of $22,470 million to $23,070 million in sales and $955 million to $1,095 million in core operating earnings. The revision marked a shift from the first quarter, when guidance was reaffirmed rather than raised, and from the third quarter of 2024, when Lear held its revenue and operating-income outlook steady after lost production at a key customer.
The company repurchased $100 million of stock in the quarter, or 735,873 shares, up from $75 million in the first quarter and $25 million a year earlier, leaving roughly $600 million in remaining authorization, down from about $1.0 billion a year ago.