Lear Corporation LEA, a supplier of automotive seating and electrical systems (E-Systems), is struggling with economic uncertainty and labor scarcity for wire harness production in the United States.

Let us see why you should offload this Zacks Rank #4 (Sell) stock from your portfolio.

Uncertain Macro Backdrop, Labor Scarcity to Hurt LEA

Ongoing global trade negotiations are creating uncertainty for the economy and the automotive industry. Lear is managing both direct tariff impacts and unclear indirect effects on production volume and mix. Since February, global production forecasts for 2025 have worsened, with it now expecting a 4% decline on a Lear-weighted basis compared with the 2% previously guided. The anticipated decline in global production is likely to hurt the company’s top line in 2025.

The company is facing a major roadblock to moving wire harness production to the United States because of labor scarcity. The wire harness is subject to the 25% tariff, which increases the cost for the company. While just-in-time seat assembly offers attractive, skilled jobs, wire harness production remains highly labor-intensive and less appealing to workers. Despite progress, automation for harnesses is not fully developed, making relocation to the United States difficult due to workforce and technology limitations.

Lear has a concentrated customer base. Six major customers, i.e., BMW, Jaguar, Land Rover, Volkswagen, Mercedez-Benz and BYD, accounted for more than 50% of its total sales in 2024. Losing business with any of these customers would significantly impact the company's top-line growth.

The Zacks Consensus Estimate for LEA’s 2025 sales and earnings per share indicates a year-over-year decline of 5.04% and 7.21%, respectively. The consensus estimate for earnings for 2026 has moved down a penny in the past seven days.

Stocks to Consider

Some better-ranked stocks in the auto space are Hesai Group HSAI, Ferrari N.V. RACE and Standard Motor Products, Inc. SMP. HSAI & RACE sport a Zacks Rank #1 (Strong Buy) each, while SMP carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for HSAI’s 2025 earnings indicates year-over-year growth of 336.36%. EPS estimates for 2026 have improved 12 cents in the past 30 days.

The Zacks Consensus Estimate for RACE’s 2025 sales and earnings implies year-over-year growth of 12.37% and 4.8%, respectively. EPS estimates for 2025 and 2026 have improved 30 cents and 36 cents, respectively, in the past seven days.

The Zacks Consensus Estimate for SMP’s 2025 sales and earnings implies year-over-year growth of 17.1% and 12.62%, respectively. EPS estimates for 2025 and 2026 have improved 6 cents and 2 cents, respectively, in the past 30 days.

Story Continues

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This article originally published on Zacks Investment Research (zacks.com).

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