Lear shares rise after Q4 beats drive fifth straight year of profit growth
Auto supplier targets $650 million free cash flow in 2026 as automation strategy expands margins
Lear Corporation shares advanced in Wednesday trading after the automotive supplier delivered stronger-than-expected quarterly results and extended its streak of annual earnings growth to five consecutive years.
The Michigan-based manufacturer reported adjusted earnings per share of $3.41 for the fourth quarter of 2025, topping analyst estimates of $2.79 by 22.1%. Revenue reached $5.99 billion, surpassing the $5.66 billion consensus forecast and representing a 5% increase from the prior year.
For the full year 2025, Lear achieved adjusted earnings per share of $12.80, marking the fifth consecutive year of growth for the automotive seating and electrical systems supplier. The performance comes despite broader challenges in the automotive sector, where production volumes have faced pressure from economic uncertainty and changing consumer preferences.
The company's strong operational performance translated into significant shareholder returns. Lear repurchased $175 million worth of shares during the fourth quarter, representing 1.63 million shares, leaving approximately $775 million remaining under its authorization. The remaining buyback capacity represents roughly 13% of the company's current $6.28 billion market capitalization.
Ray Scott, Lear's president and chief executive officer, highlighted the company's strategic transformation as a key driver for future performance. "In 2026, our expanded automation and AI leadership, combined with cost savings from restructuring actions, will be catalysts for margin expansion in both segments," Scott stated in the earnings announcement.
The company's commitment to digital innovation has accelerated through recent acquisitions and partnerships. Lear acquired StoneShield Engineering to enhance its IDEA by Lear™ advanced automation capabilities, specifically targeting improved wire harness production efficiency. Additionally, the company completed the first cohort of the Lear Fellowship program with Palantir, a initiative designed to accelerate digital and AI capabilities across its operations.
Lear provided an optimistic outlook for 2026, forecasting free cash flow of $550 million to $650 million. The guidance exceeds the company's 2025 free cash flow projection of $475-$525 million, signaling confidence in operational improvements and margin expansion initiatives.
The automotive supplier's valuation appears attractive relative to its growth prospects. Lear currently trades at a forward price-to-earnings ratio of 8.50 times, below the broader market multiple despite its consistent earnings trajectory. Analysts maintain an average price target of $127.64, representing upside from the current trading level around $119.60.
Despite the earnings beat, net income declined in the quarter even as revenue climbed higher, reflecting the challenging pricing environment facing automotive suppliers. The company has navigated rising raw material costs and competitive pressures through its efficiency initiatives and strategic investments in automation.
Lear's performance underscores a broader theme in the automotive supply chain: manufacturers that successfully integrate advanced technology and operational excellence can maintain profitability even as traditional vehicle production faces structural headwinds. The company's $1.4 billion in E-Systems awards secured during 2025 represents its largest annual total in over a decade, demonstrating continued confidence from major automakers in its technological capabilities.
Investors will be watching Lear's execution on its 2026 guidance, particularly the margin expansion targets that depend heavily on the success of its automation and AI initiatives. The company's ability to deliver on the projected free cash flow improvement could provide additional support for its share repurchase program, potentially creating a virtuous cycle of returning capital to shareholders while investing in future growth.