COMPANY DESCRIPTION

Lear Corporation (Lear or "the company") is one of the largest suppliers of automotive seating and electrical distribution systems around the globe. The company also offers high-power and hybrid electrical components and systems. Lear is a designer and manufacturer of automotive seating and electrical distribution systems and related components. Co.'s seating business consists of the design, engineering, assembly and delivery of seat systems, as well as the manufacture of seat components, including seat structures and mechanisms, seat covers, seat foam and headrests. Co.'s electrical business consists of the design, engineering and manufacturing of electrical distribution systems that route electrical signals and manage electrical power within a vehicle. Components of Co.'s electrical business include wiring harnesses, terminals and connectors, junction boxes, electronic control modules and wireless control devices. Lear operates in the US, South America, Europe, and Asia. The company is headquartered in Southfield, Michigan 

 

ECONOMIC MOAT

Lear's economic moat results from intellectual property, switching costs, cost advantages, and efficient scale. Sticky market share and cost advantages result from Lear's global engineering, its global manufacturing footprint, as well as its long-term highly integrated customer relationships. Automakers need suppliers like Lear that have facilities in the countries where the OEMs want to assemble vehicles, providing the components the automakers need on a just-in-time basis. Lear owns 226 facilities in 36 countries across all major world regions. Nearly half of Lear's 226 facilities are in 22 low-cost countries.

 

OUTLOOK

Lear has completed the acquisition of Eagle Ottawa, the world's leading supplier of premium automotive leather.  Lear finished 2014 with better-than-expected results. In fact, LEA just announced that its board authorized an increase in its share-repurchase plan, to $1 billion. Unfavorable foreign exchange rates will probably continue to impact the earnings advance. In our opinion, shares of Lear are likely outperform the broader market averages in the coming six to 12 months. Over the 3- to 5-year period, these shares offer decent price appreciation potential.