Skip to content
    LEA
    Earnings call· Jun 2026(Q2 FY26)

    LEAR Q2 FY26 earnings call LEA

    Jul 31, 2026 Source

    Executive summary

    Lear Corporation Q2 FY26 — Strong Performance Drives Raised Full-Year Guidance and Accelerated Share Repurchases

    Lear delivered strong Q2 FY26 results, driven by operational excellence and strategic wins, leading to raised full-year guidance. The company is leveraging its IDEA framework to accelerate automation and digital tools, positioning it ahead of competitors, despite navigating a dynamic global production environment and specific regional headwinds. Management remains focused on disciplined capital allocation and long-term value creation.

    Highlights

    5

    • Sales increased 3% to $6.2 billion, driving record first-half revenue of over $12 billion.

    • Core operating earnings grew 7% to $313 million in the quarter and approximately 9% for the first half.

    • Adjusted EPS increased 23% to $4.28, reflecting higher earnings and share repurchases.

    • Operating cash flow increased 55% to $461 million, with free cash flow up 69% to $288 million.

    • Secured approximately $2.9 billion in new business awards year-to-date, including significant conquest wins with Audi.

    Concerns

    4

    • Global production was flat year-over-year and down less than 1% on a Lear sales-weighted basis, with decreases in Europe (-2%) and China (-4%).

    • Organic sales in E-Systems were down 2% due to lower volumes on Lear platforms and wind-down of noncore products.

    • Second-half revenue is expected to be down $289 million from first-half actuals, primarily due to seasonal shutdowns, fewer production days, and GM full-size truck changeover.

    • Continued weakness in the China domestic market, with domestic sales down 20% through the first half of the year.

    Guidance & targets

    20
    CategoryTargetConfidence
    Full-year 2026 Revenue
    $23.8 billion
    high materiality
    High
    Full-year 2026 Operating Earnings
    $1.14 billion
    high materiality
    High
    Full-year 2026 Operating Cash Flow
    $1.3 billion
    medium materiality
    High
    Full-year 2026 Free Cash Flow
    $640 million
    high materiality
    High
    Full-year 2026 Share Repurchases
    at least $350 million
    high materiality
    High
    Second Half 2026 Revenue
    $11.7 billion
    medium materiality
    Medium
    Second Half 2026 Operating Income
    $529 million
    medium materiality
    Medium
    Second Half 2026 Operating Margins
    4.5%
    medium materiality
    Medium
    Q3 2026 Revenue
    $5.8 billion to $5.9 billion
    low materiality
    Medium
    Q3 2026 Seating Margins
    low to mid-6s
    low materiality
    Medium
    Q3 2026 E-Systems Margins
    low 4s
    low materiality
    Medium
    Full-year 2026 Global Industry Production (Lear sales weighted)
    down less than 2%
    medium materiality
    Medium
    Full-year 2026 Euro Exchange Rate
    $1.16 per euro
    low materiality
    High
    Full-year 2026 Chinese RMB Exchange Rate
    RMB 6.82 to the dollar
    low materiality
    High
    Full-year 2027 Seating Net Performance
    40 bps
    medium materiality
    Medium
    Full-year 2027 E-Systems Net Performance
    80 bps
    medium materiality
    Medium
    Long-term E-Systems Operating Margins
    steady improvement
    high materiality
    Medium
    Long-term Company Overall Operating Margins
    steady improvement
    high materiality
    Medium
    Long-term Organic Growth
    return to 3-4 percentage points above market
    high materiality
    Medium
    Long-term CapEx to Revenue
    no meaningful change
    low materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Seating
    Sales increased due to new business, including Series M6 and M7 in China, BMW iX3 in Europe, and Jeep Cherokee in North America, partially offset by lower volumes on other platforms in China. Operating margins were flat compared to last year as net performance and margin-accretive backlog offset lower volumes and FX impact.
    Organic sales growth: 2%Adjusted earnings: $312 millionNet performance (H1 FY26): 40 bpsBusiness awards YTD: $2.3 billion
    		$4.6 billion3%—6.7%
    E-Systems
    Organic sales were down due to lower volumes on Lear platforms, including VW programs in China and Mustang Mach-E in North America, as well as the build-out of Ford Escape, Focus, and Lincoln Corsair. Higher operating margins were driven by strong operating performance, partially offset by program build-outs, wind-down of discontinued product lines, and lower volumes.
    Organic sales growth: -2%Adjusted earnings: $91 million (Q2 FY26) vs $76 million (Q2 FY25)Adjusted operating margin (Q2 FY25): 4.9%Net performance (Q2 FY26): 155 bpsNet performance (H1 FY26): 100 bpsBusiness awards YTD: $500 million
    		$1.6 billion2%—5.8%

    Operational metrics

    37
    Record First Half Revenue
    over $12 billion
    H1 FY26

    Achieved in the first half of the year.

    Core Operating Earnings Growth
    approx. 9%
    H1 FY26

    Growth for the first half of the year.

    Business Awards YTD
    $2.9 billion
    YTD FY26

    Total business awards year-to-date.

    Growth over Market
    approx. 2 percentage points
    Q2 FY26

    For the total company, despite headwinds from program roll-offs and wind-down of noncore E-Systems products.

    Total Company Margins Expansion
    20 bpsYoY
    Q2 FY26

    Year-over-year expansion.

    Cost of Debt
    less than 4%
    current

    Low cost of debt.

    Debt Maturity
    approx. 11 years
    current

    Weighted average maturity of debt structure.

    Global Production (Lear sales weighted)
    flatYoY
    Q2 FY26

    Compared to the same period last year.

    North America Production
    flat
    Q2 FY26

    Production volumes in North America.

    Europe Production
    down 2%
    Q2 FY26

    Production volumes in Europe.

    China Production
    down 4%
    Q2 FY26

    Production volumes in China.

    US Dollar vs Euro
    weakened
    Q2 FY26

    US dollar weakened against the euro.

    US Dollar vs RMB
    weakened
    Q2 FY26

    US dollar weakened against the Chinese RMB.

    Organic Sales
    up 1%
    Q2 FY26

    Reflecting the addition of new business in Seating.

    E-Systems Noncore Electronics Wind-down Revenue
    $90 million
    FY26

    Revenue that goes away this year, impacting 2027 revenue outlook.

    China Domestic Sales
    down 20%
    H1 FY26

    Weakness in the China domestic market.

    China Market Share Shift (Global to Chinese OEMs)
    3%revised from 1.5%
    FY26

    Increased share shift embedded in guidance.

    China Revenues with Chinese Automakers
    44%
    current

    Percentage of China revenues with Chinese automakers.

    Capital Expenditure
    2.8%
    FY26

    In line with 5-year and 10-year average.

    Capital Cost Reduction (internal manufacturing)
    20% or more
    current

    Through manufacturing own capital for purpose-built use.

    Automated Sewing Cells
    over 200
    current

    Automated tune flat sewing cells globally.

    Labor Reduction (automated sewing)
    50%
    current

    Reduction in labor in automated sewing applications.

    Automated Seat Finesse Cells
    over 50
    current

    Either in production or being deployed.

    Automated End-of-Line Testing Cells
    over 40
    current

    Either in production or being deployed.

    Annual Savings (automated finesse & end-of-line testing)
    $14 million
    annual

    Combined annual savings from automated seat finesse and end-of-line testing cells.

    Direct Labor in Wiring (tape application)
    nearly 20%
    current

    Percentage of direct labor in wiring dedicated to tape application.

    Sales Reduction (H1 to H2)
    $664 million
    H1 to H2 FY26

    Sales reduction from first half to second half, combining volume mix and backlog wind-down.

    Downward Conversion (H1 to H2)
    25%
    H1 to H2 FY26

    Downward conversion on sales reduction from first half to second half.

    Tariff Refunds Impact on H2 Revenue
    $190 million
    H2 FY26

    Higher revenue in the second half due to tariff refunds, with no earnings attached.

    Net Performance Improvement (H1 to H2)
    55 bpssequential
    H1 to H2 FY26

    Sequential improvement in operating performance anticipated in the second half.

    Nonconsolidated JV Revenue Growth (China)
    positive
    Q2 FY26

    Revenue growth in nonconsolidated joint ventures in China, highly concentrated with Chinese OEM business.

    New Business Awards with Chinese Automakers YTD
    $550 million
    YTD FY26

    Significant portion of new business awards with Chinese automakers.

    2026-2028 Backlog Improvement
    $400 millionsince start of year
    2026-2028

    Improvement in backlog from what was on contract at the start of the year.

    Audi Conquest Award Magnitude
    multiple hundreds of millions of dollars75% as large as largest conquest award
    long-term

    Significant revenue potential from the Audi conquest award, with biggest backlog impact in 2029.

    2027 Backlog
    $725 million
    FY27

    Backlog for next year, as mentioned by an analyst and confirmed by management.

    IDEA Savings
    $35 million
    H1 FY26

    Savings achieved in the first half, on track for full-year target.

    Restructuring Savings
    $50 million
    H1 FY26

    Savings generated through the second quarter, more than half of full-year target.

    Industry KPIs

    8
    MetricValueDetails
    EPS$4.28USD
    Revenue$6.2 billionUSD
    Inventoryreduction
    Operating margin4.8%%
    Operating income EBIT$313 millionUSD
    Cash investments balance$3 billionUSD
    Tariff impact mitigation$40 millionUSD
    Share buyback capital return$100 millionUSD

    Product announcements

    4
    ProductTypeDetails
    ComfortFlex/FlexAir Applicationsexpansion
    Modular Thermal Comfort Systemsmilestone
    Automated Wire Taping Capabilityroadmap
    3D Automated Sewingroadmap

    Deals & partnerships

    8
    AudiSignificant awards for complete seats, ComfortFlex, and FlexAir applications.multiple hundreds of millions of dollars

    One of Lear's largest awards in recent history, secured due to industry-leading automation capabilities, quality, and efficiency. Launch towards tail end of '28, ramping through '29 and into '30.

    HyundaiComplete seats program for North America.

    Additional seating win in North America.

    North American EV automakerComfortFlex awards.

    Additional seating win.

    BMWComfortFlex awards.

    Additional seating win.

    LeapmotorComplete seat program for their expansion into South America.

    First win with a Chinese automaker in South America, utilizing existing capacity and limited capital investment as production will be in a Stellantis facility.

    Luxury Chinese automakerWire harness awards.

    E-Systems growth in core products.

    BAICWire harness awards.

    E-Systems growth in core products (non-consolidated award).

    RenaultReplacement wire program.

    Awarded in E-Systems, contributing to new or conquest programs.

    Risks & headwinds

    5
    China Market WeaknessH2 FY26

    Domestic sales down 20% through H1 FY26; assumed to continue in H2 FY26.

    Mitigation: Focus on growing with Chinese automakers (44% of China revenues currently, 50%+ target for FY27) and targeting export-oriented programs.

    Program Roll-offs/Wind-downsFY26-FY27

    Headwinds from Escape and Corsair roll-offs; $90 million revenue impact from noncore E-Systems wind-down in FY26, $235 million in FY27.

    Mitigation: Offset by new business additions and strong net operating performance.

    Production Volume Pullbacks on Key PlatformsFY27

    Anticipated lower production volumes for JLR, Ford Explorer, Stellantis Grand Wagoneer, and GM full-size trucks in FY27.

    Mitigation: Offset by robust backlog of new business awards launching in 2028-2029.

    Seasonal Shutdowns/Production DaysH2 FY26

    H2 FY26 revenue down $289 million from H1 actuals.

    Mitigation: Partially offset by new seating business and non-recurrence of one-time adjustments (EPA-related tariff recoveries).

    Geopolitical ConflictOngoing

    Unquantified potential economic weakness.

    Mitigation: Low end of guidance range protects against unexpected economic weakness.

    What to watch in Q3 FY26

    5

    China domestic market demand recovery

    Second half of the year
    CurrentDown 20% in H1 FY26
    TargetImprovement in demand

    Why it matters

    Continued weakness in China is the biggest wildcard for full-year guidance and future growth.

    And what we've embedded into our guidance is continued weakness in China in the second half of the year, particularly on our global customers, but also, in certain cases, and select Chinese automakers as well. And so that's probably the biggest thing that has changed.

    Q&A highlights

    8

    Why is the downward conversion on lost volume so heavy in H2, and what other factors (like tariff refunds) are at play?

    Jason explained that the heavier downward conversion is due to unusual factors like tariff refunds ($190M higher H2 revenue with no earnings), and the combination of new business rolling on with new fixed costs and existing platforms rolling off at variable margins. He also cited the fiscal calendar change and GM's full-size truck changeover as unique H2 impacts. Strong net operating performance is still anticipated in H2.

    “If you look at the change in operating income relative to sales first half to second half, it does appear to be heavier downward conversion than you would ordinarily expect. And there are some unusual factors that are driving that even outside of volume backlog and the wind down you have, for example, the impact of the tariff refunds. So you have a $190 million higher revenue in the second half versus the first half just because of that with no earnings attached to it.”

    asked by Dan Levy · answered by Jason Cardew

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Priorities & Business Wins

    Lear continues to execute on its four strategic priorities, securing approximately $2.9 billion in business awards year-to-date, with over 50% for new and conquest programs. Notable wins include significant Audi programs in Europe and North America, Hyundai in North America, and Leapmotor in South America, demonstrating strong global leadership in Seating and E-Systems. The company's strategy has been validated by these awards, positioning it for future growth.

    02

    IDEA by Lear & Automation

    The IDEA by Lear framework is driving operational excellence, with $35 million in savings achieved in H1 2026 towards a $75 million full-year target. The new Rochester Hills advanced manufacturing integration center showcases industry-leading automation, including automated wire taping and 2D/3D sewing, reducing labor by 50% in some applications. A 'lights-out' shift pilot in Wismar, Germany, for connector production highlights advanced digital integration, demonstrating the potential for a new operating model.

    03

    Margin Expansion & Net Performance

    The company achieved 20 basis points of total company margin expansion year-over-year. Seating delivered 40 basis points of net performance in H1, while E-Systems significantly expanded margins by 90 basis points in Q2, driven by 155 basis points of net performance, exceeding its full-year target. These efforts are expected to accelerate in the second half, contributing to overall margin improvement.

    04

    Capital Allocation & Shareholder Returns

    Lear maintains a disciplined capital allocation strategy, generating strong cash flow and returning excess cash to shareholders. The company repurchased $100 million of shares in Q2, bringing H1 repurchases to $175 million, and raised its full-year repurchase target to at least $350 million. Since 2011, Lear has returned over 85% of free cash flow to shareholders through repurchases and dividends, with $600 million remaining in its current authorization.

    05

    China Market Dynamics

    The China domestic market experienced significant weakness, with sales down 20% in H1 2026. Lear has adjusted its full-year outlook to reflect continued weakness and an increased share shift from global customers to Chinese automakers (from 1.5% to 3%). Despite this, Lear is successfully growing with Chinese OEMs, with 44% of China revenues now from these customers, projected to exceed 50% next year, and is strategically targeting export-oriented programs.

    06

    2027 Outlook & Backlog

    While the 2028-2029 backlog is robust, 2027 is expected to see limited organic growth due to the $235 million wind-down of noncore electronics products and anticipated lower production volumes on key platforms (JLR, Ford Explorer, Stellantis Grand Wagoneer, GM full-size trucks). The company aims to return to historical growth above market (3-4 percentage points) in 2028-2029, with a detailed 3-year backlog to be provided in Q4.

    AI-generated summary of the company’s earnings call. Not investment advice.