Lear Corp. (LEA) — Although S&P Capital IQ Equity Research considers LEA stock to be a high-risk investment, the supplier of automotive seating and electric power systems has withstood past economic pressures. Analysts note that the company has a strong balance sheet and is likely to continue to return capital to shareholders through stock buybacks and dividend increases. Lear Corp. currently pays an annual dividend of $1.20 per share for a forward yield of 1.1%.
The company has a history of solid revenue and earnings increases. Even with the negative impact of currency rates, Capital IQ expects revenues to increase 4% this year, pushed higher by increased demand in the United States and China. Its analysts estimate earnings will jump 15% in 2016 to $12.50 per share and increase another 3% to $12.90 per share in 2017.
Capital IQ rates LEA stock a “Strong Buy” with a 12-month price target of $122, which is 10 times its 2016 EPS estimate.
Turning to the chart, LEA stock formed a triple-top at $127 late last year and then broke down at $120 in January. However, shares held at the long-term support line at $100 last week, triggering a buy signal from my proprietary indicator, the Collins Bollinger Reversal (CBR), at $101.
LEA stock still has to surmount the 200-day moving average at $110, but recent high-volume buying and an oversold MACD indicator should push prices up. The chart is relatively open above $110.
Buy LEA stock at $105 with a trading target of $122 for a potential return of 16%. A stop-loss order should be entered at $96.
