Garrett Motion's Q2 FY23 Earnings Surpass Estimates, Company Lifts 2023 Forecast

Garrett Motion Inc GTX reported a Q2 FY23 sales of $1.01 billion, up 18% on a GAAP basis, up 19% at constant currency, beating the Street expectation of $982 million.

Revenues benefitted from higher volumes with new product ramp-ups, inflation recoveries (net of pricing) across all product lines, and the COVID-lockdown lifting in China.

Gross profit was $202 million compared to $169 million in Q2 2022, with a gross profit margin of 20.0% vs 19.7% a year ago.

Adjusted EBITDA increased to $170 million from $138 million, driven by higher volume, improved productivity, and pass-through inflation net of pricing.

Adjusted EBITDA margin increased to 16.8% compared to 16.1% in Q2 2022. 

Adjusted EPS of $0.29 beat the consensus of $0.23.

Net cash provided by operating activities totaled $164 million in the quarter, compared to $104 million a year ago.

Adjusted free cash flow stood at $140 million versus $23 million in Q2 2022. 

As of June 30, 2023, Garrett had $1.048 billion in available liquidity, including $478 million in cash and cash equivalents and $570 million of undrawn commitments under its revolving credit facility.

As of March 31, 2023, the debt outstanding totaled $1.891 billion.

Outlook FY23, reaffirmed: Garrett Motion raised net sales outlook to $3.84 billion to $4.03 billion (from $3.79 billion-$3.98 billion vs. consensus of $3.98 billion), net income to $255 million to $290 million (from $231 million -$268 million) and adjusted EBITDA to $620 million to $670 million (from $585 million-$635 million). 

The company increased the outlook for net cash provided by operating activities to $410 million to $510 million (from $392 million-$492 million) and adjusted free cash flow to $340 million to $440 million (from $315 million-$415 million).

Garrett now expects 2023 light vehicle industry production to be ~84Mu, a 2% increase vs. 2022 and a 1% increase vs. the prior outlook. 

Price Action: GTX shares are trading 3.97% higher at $7.74 on the last check Thursday.

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