Lear downgraded on likely sector correction at Wells Fargo

Wells Fargo analyst Colin Langan downgraded Lear to Equal Weight from Overweight with a price target of $139, down from $149. Auto makers and suppliers have rallied since the end of Q3 but most earnings drivers have weakened, except currency, Langan tells investors in a research note. The analyst lowered 2023 global light vehicle production forecast to 1.8% from 7.1%, below the S&P’s 4.0%. The view reflects a U.S. sales recovery and inventory build as well as volume declines in Europe and China, Langan tells investors in a research note. Moreover, inflationary costs will likely persist next year, and automakers may be less receptive to cost recoveries given their own price/mix headwinds, says the analyst. His revised earnings estimates are 9% below consensus on average. This sets up a likely sector correction with 2023 guidance, and likely a better entry point, early next year, Langan contends. As such, he downgraded both Magna and Lear.