Scott Olson
A strike by the United Auto Workers could be just a week away after recent proposals from the legacy Detroit automakers did not come close to the expectations of the powerful union. A strike could impact auto suppliers if vehicle production is stalled for a few weeks.
CFRA cut its rating on Lear Corporation (NYSE:LEA) on Thursday to Sell from Buy. The firm also lowered its 12-month target by $55 to $125 based on a 2024 P/E of 7.5X and what it said was a justified discount to historic average multiples.
The double downgrade was based on CFRA’s concern over Lear’s (LEA) high degree of exposure to the Detroit Three automakers and risks related to a potential UAW strike starting in mid-September, which is seen lasting for for several weeks and having a major impact on LEA’s net sales.
Lear (LEA) is also noted to be coming off a better-than-expected quarter, with increased full-year revenue and earnings guidance, which could be at risk in the event of a strike that lasts well into Q4.
In the same vein, CFRA cuts its rating on Magna International (NYSE:MGA) to Sell from Hold. The firm cuts its 12-month target by $15 to $50 on a 2024 P/E of 7.3X. Magna International (MGA) also is seen as having a high degree of exposure to the Detroit Three automakers and risks related to a potential UAW strike. “Given the slight bounce in the shares over the last couple of weeks and downside risk to the shares in the near term, we think investors should Sell,” warned CFRA.
Magna International (MGA) and Lear (LEA) have both turned lower over the last six weeks as the threat of a UAW strike has heated up.
More on Lear and Magna International
Image and article originally from seekingalpha.com. Read the original article here.