Garrett Motion Shifts Into Reverse: Sales, Earnings Skid On Demand Weakness

Garrett Motion Inc GTX shares are trading lower after the company reported second-quarter FY24 sales of $890 million, missing the consensus of $975.5 million.

Revenues declined 12% Y/Y (-10% Y/Y at constant currency) due to demand softness in gasoline, diesel and commercial vehicles applications.

Gross profit was $185 million, compared to $202 million last year, with a gross profit margin of 20.8% vs. 20.0% a year ago.

Adjusted EBITDA declined to $150 million from $170 million owing to demand softness across gasoline, diesel, and commercial vehicles, commodity deflation’s impact on pricing net of inflation pass-through, and unfavorable foreign exchange impact.

Adjusted EBITDA margin increased to 16.9% compared to 16.8% prior year. EPS of $0.28 missed the consensus of $0.30.

Operating cash flow totaled $126 million in the quarter, compared to $164 million a year ago. Adjusted free cash flow stood at $62 million versus $140 million a year-ago.

As of June-end, Garrett had $698 million in liquidity, comprising $98 million in cash and $600 million in undrawn revolving credit. Debt outstanding totaled $1.497 billion.

FY24 Outlook: Garrett lowered FY24 net sales guidance from $3.80 billion-$3.95 billion to $3.50 billion-$3.65 billion vs. an estimate of $3.86 billion and adjusted EBITDA outlook from $590 million-$650 million to $583 million-$633 million.

Garrett now expects light vehicle production to be down 2% vs. 2023 (flat vs. 2023 in the prior outlook) and commercial vehicle production flat to down 1%, including on- and off-highway (+2% in the prior outlook).

Olivier Rabiller, President and CEO of Garrett, said, “We continued to deliver strong margin performance by leveraging our variable cost structure and driving sustained operating productivity. These results enabled us to once again make very significant progress on our capital allocation priorities.”

“In Q2, we repurchased $65 million of common stock, totaling $174 million for the first half of 2024. We also issued $800 million of senior unsecured notes at favorable interest rates which we used to partially repay our Term Loan B in the quarter.”

Investors can gain exposure to the stock via SPDR S&P Kensho Smart Mobility ETF HAIL.

Price Action: GTX shares are down 12.8% at $7.965 at the last check Thursday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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