Lear Corp. (NYSE:LEA) Q3 2018 Earnings Conference Call Transcript
Oct 25, 2018 • 08:00 am ET
Good morning and welcome to the Third Quarter 2018 Earnings Call. I will now turn the call over to Alicia Davis, VP of IR.
Good morning and thanks for joining us for Lear's third quarter 2018 earnings call. Presenting today are Ray Scott, Lear's President and CEO; and Jeff Vanneste, SVP and CFO. Other members of Lear's Senior Management team have also joined us on the call. Following prepared remarks by Ray and Jeff, we will open the call for Q&A. Please note that you can find the presentation that accompanies these remarks at ir.lear.com.
(Forward-Looking Cautionary Statements)
I also want to remind you that during today's presentation, we will refer to non-GAAP financial metrics. You are directed to the slides in the appendix of our presentation for the reconciliation of non-GAAP items to the most directly comparable GAAP measures.
The agenda for today's call is on slide 3; first, Ray will provide us a business update and review highlights from the third quarter. Jeff will then review our third quarter financial results and provide an update of our 2018 financial outlook. Finally, Ray will offer some concluding remarks. Following the formal presentation, we will be happy to take your questions.
With that I'd like to invite Ray to begin his presentation.
Thanks Alicia, great job. And good morning everyone, it's a pleasure to speak with you today. Earlier this morning, we released our third quarter financial results and updated our full year 2018 guidance. As you can see on slide 5, we reported quarterly sales of $4.9 billion. Core operating earnings of $399 million and adjusted EPS of $4.09 per share.
In the face of a number of macroeconomic and customer specific challenges, the Lear team performed exceptionally well. As a testament to our strong operating capabilities, our core margins were flat at 8.2% for the quarter. Outpacing a 2% decline in sales over the third quarter of 2017. We also grew adjusted EPS by 3%. At 12.1%, E-Systems operating margins were lower than our recent historical average, due primarily to production volume declines on key profitable platforms.
However in Seating, operating margins were 8.6%, up 50 basis points year-over-year. Unfavorable industry conditions impacted the results in Seating negatively as well. But doing things like targeting cost reductions helped us to offset these factors and expand operating margins year-over-year. I'm very proud of what the team has accomplished in this very challenging macro environment.
As you know, the automotive sector has been under pressure for the past few months, due in a large part to macroeconomic conditions outlined on slide 6. With concerns about trade and tariffs, rising interest rates, foreign exchange risk, the North American Auto Cycle and declining production volumes in China and Europe, the industry looks very different today than it did at the beginning of the year. Despite these headwinds, we remain very bullish on our business prospects and think that we are -- there are many reasons to be positive about the macro conditions going