Adient (ADNT) Up 0.5% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Adient (ADNT). Shares have added about 0.5% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Adient Q2 Earnings Miss Estimates
Adient reported adjusted earnings per share of 32 cents for the second quarter of fiscal 2023, lagging the Zacks Consensus Estimate of 41 cents. The underperformance largely stemmed from lower-than-anticipated profits from the Americas segment. The bottom line, however, reversed the year-ago loss of 13 cents per share. In the reported quarter, Adient generated net sales of $3,912 million, up 12% from $3,506 million recorded in the prior-year period and surpassed the Zacks Consensus Estimate of $3,717 million.
Segmental Performance
Adient currently operates through three reportable segments — the Americas, including North America and South America; Europe, the Middle East and Africa (EMEA) and Asia Pacific/China (Asia).
In the reported quarter, the Americas segment recorded revenues of $1,761 million, an increase of 10.3% from the year-ago period, topping the consensus metric of $1,745 million. The segment posted an adjusted EBITDA of $72 million, up from $46 million recorded in the prior-year period. The increase was driven by favorable volume and mix, net material margin, improved foreign exchange and low freight costs. The figure, however, fell short of the consensus metric of $75 million.
In the fiscal second quarter, the EMEA segment registered revenues of $1,401 million, which increased 15% year over year and outpaced the consensus mark of $1,284 million. The segment recorded EBITDA of $53 million in the quarter under review, higher than the $30 million generated in the year-ago period. Improved material margins and favorable volume and mix resulted in the upside. The reported EBITDA outpaced the consensus metric of $39.2 million.
In the reported quarter, revenues in the Asia segment came in at $774 million, up 7% year over year and topping the consensus mark of $673 million. The segment’s adjusted EBITDA grew 7.6% to $113 million, beating the consensus mark of $93 million. Improved product and volume mix led to the upswing.
Financial Position
Adient had cash and cash equivalents of $826 million as of Mar 31, 2023 compared with $947 million on Sep 30, 2022. Long-term debt amounted to $2,531 million in the reported quarter, down from $2,564 million as of Sep 30, 2022. Capital expenditures totaled $56 million in the fiscal second quarter of 2023 compared with $57 million in the prior-year quarter.
Outlook
Adient updated its fiscal 2023 forecast. It envisions revenues of $15 billion, the same as its previous estimate. The adjusted EBITDA forecast remains unchanged at $850 million for the year. Expected equity income and Capex also remained unchanged at $70 million and $300 million, respectively. FCF is now estimated to be $215 million, up from the previous estimate of $200 million. Interest expenses and cash tax are now estimated to be $180 million, up from prior guidance of $160 million and $95 million, up from the previous guidance of $90 million, respectively.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -25.32% due to these changes.
VGM Scores
Currently, Adient has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise 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, Lear (LEA), a stock from the same industry, has gained 5.7%. The company reported its results for the quarter ended March 2023 more than a month ago.
Lear reported revenues of $5.85 billion in the last reported quarter, representing a year-over-year change of +12.2%. EPS of $2.78 for the same period compares with $1.80 a year ago.
Lear is expected to post earnings of $2.61 per share for the current quarter, representing a year-over-year change of +45.8%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.2%.
Lear 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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