A month has gone by since the last earnings report for Adient (ADNT). Shares have added about 3.4% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Adient due for a pullback? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Adient Q3 Earnings Miss Estimates, Guidance Trimmed
Adient reported adjusted earnings per share (EPS) of 32 cents for the third quarter of fiscal 2024. Earnings fell from 98 cents recorded in the year-ago period and missed the Zacks Consensus Estimate of 67 cents.
The company generated net sales of $3.72 billion, which decreased 8% year over year and missed the Zacks Consensus Estimate of $3.81 billion.
Segmental Performance
Adient currently operates through three reportable segments — Americas, including North America and South America; Europe, which includes the Middle East and Africa (EMEA); and Asia Pacific/China (Asia).
In the reported quarter, the Americas segment recorded revenues of $1.74 billion, which declined 8.6% from the year-ago period and missed the Zacks Consensus Estimate of $1.76 billion. The segment recorded an adjusted EBITDA of $99 million, which increased from $95 million recorded in the prior-year quarter and beat the Zacks Consensus Estimate of $67 million, driven by efficiencies in material margin, freight and engineering.
The EMEA segment registered revenues of $1.29 billion, which declined 10.4% year over year and missed the Zacks Consensus Estimate of $1.35 billion. The segment recorded an adjusted EBITDA of $25 million, which significantly dropped from the $103 million generated in the year-ago period. It also missed the Zacks Consensus Estimate of $91 million due to unfavorable business performance from lower levels of customer releases.
In the fiscal third quarter, revenues in the Asia segment came in at $712 million, which declined 4% year over year and missed the Zacks Consensus Estimate of $729 million. The segment’s adjusted EBITDA rose 1% year over year to $101 million and beat the Zacks Consensus Estimate of $95 million due to efficiencies in the material margin, launch and labor.
Financial Position
Adient had cash and cash equivalents of $890 million as of Jun 30, 2024, compared with $1.11 billion as of Sep 30, 2023.
As of Jun 30, 2024, long-term debt amounted to $2.4 billion.
Capital expenditures totaled $70 million compared with $60 million in the prior-year quarter.
During the quarter under review, ADNT repurchased nearly 2.6 million shares for $75 million.
Revised Guidance for 2024
Adient now envisions fiscal 2024 revenues to be $14.6 billion, down from the previous guidance of $14.80-$14.90 billion. Adjusted EBITDA is estimated to be $870 million, down from the prior guidance of $900-$920 million. Equity income is projected to be $80 million.
Free cash flow is anticipated to be $250 million. Capex and cash tax are estimated to be $285 million and $100 million, down from previous estimates of $310 million and $105 million respectively. The company expects interest expenses to be $185 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review flatlined during the past month.
VGM Scores
At this time, Adient has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren’t focused on one strategy, this score is the one you should be interested in.
Outlook
Adient has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Adient is part of the Zacks Automotive – Original Equipment industry. Over the past month, BorgWarner (BWA), a stock from the same industry, has gained 4.5%. The company reported its results for the quarter ended June 2024 more than a month ago.
BorgWarner reported revenues of $3.6 billion in the last reported quarter, representing a year-over-year change of -20.3%. EPS of $1.19 for the same period compares with $1.35 a year ago.
BorgWarner is expected to post earnings of $0.93 per share for the current quarter, representing a year-over-year change of -5.1%. Over the last 30 days, the Zacks Consensus Estimate has changed -2.3%.
BorgWarner has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
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