Lear (NYSE:LEA) reported higher third-quarter sales, earnings and margins despite a decline in global vehicle production, while maintaining its full-year core operating earnings outlook after reducing its revenue forecast to reflect weaker production schedules, particularly in China.
Third-quarter sales rose 2% year over year to $5.8 billion, while global vehicle production declined 2% on a Lear-weighted basis. Core operating earnings increased 6% to $256 million, marking the company’s fourth consecutive quarter of year-over-year improvement. Adjusted earnings per share climbed 33% to $3.71, aided by higher earnings and share repurchases.
“Our resilience is the result of a focused strategy and a team that knows how to execute,” President and CEO Ray Scott said during the company’s third-quarter 2026 earnings call.
Segment margins expand amid mixed production trends
Lear’s Seating segment generated third-quarter sales of $4.3 billion, up 2% from a year earlier. The increase reflected new program launches, including the BMW iX3, Mercedes GLC with EQ Technology and Audi Q7 in Europe; the Seres M6 in China; and the Jeep Cherokee in North America. Higher volumes on Jaguar Land Rover platforms also helped, partially offset by lower volumes on Lear platforms in China and North America.
Seating adjusted earnings rose 5% to $274 million, with adjusted operating margin reaching 6.3%. The margin improvement was driven by net performance and a margin-accretive backlog, partially offset by lower production volumes on Lear platforms.
E-Systems sales increased 1% to $1.4 billion. The segment’s adjusted earnings rose to $69 million, or 4.8% of sales, from $60 million, or 4.2% of sales, in the prior-year period. Lear said the improvement reflected strong net performance and higher volumes on certain customer platforms, partly offset by the build-out of Ford Escape, Focus and Lincoln Corsair programs and the wind-down of discontinued product lines.
Scott said total company operating margins expanded 20 basis points year over year. E-Systems margins expanded 60 basis points, while Seating margins grew 20 basis points.
China outlook prompts revenue reduction
For the full year, Lear now assumes global industry production will decline 1% on a Lear sales-weighted basis, a modest improvement from its prior outlook for a decline of less than 2%. The company cited stronger expected volumes in Europe, partly offset by lower production assumptions in China.
However, Lear reduced its full-year revenue outlook midpoint by approximately $225 million, citing lower production volumes on Lear programs, especially in China, as well as foreign-exchange effects. The company said higher supplier pass-through tied to commodity costs and commercial recoveries partially offset those pressures.
Despite the lower sales forecast, Lear maintained its outlook for full-year core operating earnings. Jared Fedele, vice president of finance for Seating and E-Systems, said operational execution, additional restructuring savings and anticipated commercial-negotiation resolutions are expected to offset the impact of lower volumes and rising commodity and other input costs.
The company increased its restructuring-cost outlook by $25 million as it takes additional actions to optimize its cost structure. Lear also adjusted its operating cash flow and free cash flow outlook to support those investments.
Chief Financial Officer Jason Cardew said the company’s outlook range remains wider than usual because of the evolving China production environment, commercial negotiations and the need for continued execution. He said Lear’s best estimate was the midpoint of the range at the time of the call.
Business awards and China strategy
Lear reported approximately $3.9 billion in year-to-date net business awards, including about $3.1 billion in Seating and $800 million in E-Systems. More than half of Seating awards and about 70% of E-Systems awards were for new or conquest programs, according to the company.
The company highlighted several Seating wins, including complete-seat, foam and heat awards from a North American automaker; what Scott called Lear’s largest complete-seat program award in India with Mahindra & Mahindra; modular seating awards with Mercedes and Jaguar Land Rover; and programs with BYD in Thailand and Indonesia.
In China, Lear said its current customer mix remains weighted toward higher-end and luxury vehicles, leaving it underrepresented in lower-priced vehicle exports. Cardew said 23% of Lear’s year-to-date business awards were from Chinese automakers, compared with 8.5% of its current consolidated and non-consolidated revenue.
Management said Lear expects its China revenue mix with domestic automakers to rise from 44% currently to about 50% or slightly more next year, with a path to 55% and beyond over the following two to three years when recent awards are included.
Automation investment and capital returns
Scott also discussed Lear’s Orion, Michigan, Seating facility, which is expected to begin production next year and support GM’s Cadillac Escalade, Chevrolet Silverado and GMC Sierra nameplates. The facility incorporates automated material handling, storage, robotics and digital production-management systems.
Lear expects automation at Orion to reduce conversion-cost requirements by 10% to 15%. Scott described the plant as a blueprint for future Seating facilities, including prospective programs such as the Ford Super Duty.
Third-quarter operating cash flow was $329 million, down from $444 million a year earlier because of higher tooling and engineering investments and working-capital timing. Free cash flow totaled $158 million.
The company repurchased $175 million of stock during the quarter, bringing year-to-date repurchases to $350 million and completing its full-year target ahead of schedule. Lear’s board increased its share-repurchase authorization to $1.5 billion and extended it through Dec. 31, 2029.
Separately, Scott said Cardew will retire after more than 34 years with Lear. Fedele, who has been with the company for 23 years, will succeed him as CFO effective March 1.
About Lear (NYSE:LEA)
Lear Corporation is a global automotive technology company that designs and manufactures products used in passenger vehicles and commercial vehicles. Its operations are organized primarily around two areas: seating and e-systems. Lear supplies complete vehicle seating systems, including seats, structures, mechanisms, foam, covers and related components, as well as electrical distribution systems and other technologies that support vehicle power management and connectivity.
The company serves automotive manufacturers and their vehicle programs in major markets across North America, Europe, Asia and other regions.
