Lear Corp Earnings: The Streak is Broken

Rising revenue was not enough for Lear Corporation (NYSE:LEA) as the auto parts company saw profit fall in the fourth quarter. Lear and its affiliates design and manufacture complete automotive seat systems and components as well as electrical distribution systems and electronic products.

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Lear Earnings Cheat Sheet for the Fourth Quarter

Results: Net income for the auto parts company fell to $106.5 million ($1.03 per share) vs. $117.1 million ($1.08 per share) a year earlier. This is a decline of 9.1% from the year earlier quarter.

Revenue: Rose 11% to $3.51 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: Lear Corporation reported adjusted net income of $1.26 per share. By that measure, the company beat the mean estimate of $1.18 per share. It beat the average revenue estimate of $3.46 billion.

Quoting Management: “Lear had another strong year of financial performance in 2011. Our sales and earnings increased at a faster pace than industry production, and in the fourth quarter, we achieved our 10th consecutive quarter of improved earnings,” said Matt Simoncini, Lear’s president and chief executive officer. “We are continuing to invest in strengthening and growing our core businesses with an emphasis on increasing our component capabilities in emerging markets. At the same time, during 2011, we initiated dividend and share repurchase programs to return cash to shareholders. Despite near-term uncertainty in Europe, we continue to believe long-term growth in global auto production will continue and we are taking appropriate actions to strengthen and grow our company.”

Key Stats:

The company has enjoyed double-digit year-over-year percentage revenue growth for the past five quarters. Over that span, the company has averaged growth of more than threefold, with the biggest boost coming in the most recent quarter when revenue rose 1011.5% from the year earlier quarter.

Last quarter’s profit decrease breaks a streak of three consecutive quarters of year-over-year profit increases. Net income rose 5.7% in the third quarter from the year earlier, while the figure rose 11.1% in the second quarter and more than twofold in the first quarter.

The company topped expectations last quarter after falling short of forecasts in the third quarter with net income of $1.08 versus a mean estimate of net income of $1.14 per share.

Margins rose in the third quarter after falling the quarter before. Gross margin rose 83.2 percentage points to 90.7% from the quarter earlier quarter. In the second quarter, the figure rose 0.3 percentage point to 8.1% from the year earlier quarter.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the first quarter of the next fiscal year has moved down from $1.41 a share to $1.33 over the last sixty days. For the fiscal year, the average estimate has moved down from $5.30 a share to $5.26 over the last ninety days.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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To contact the reporter on this story: Derek Hoffman at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com