It has been about a month since the last earnings report for Adient (ADNT). Shares have added about 23.9% in that time frame, outperforming 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 drivers.
Adient's Q1 Earnings & Revenues Surpass Estimates
Adient reported adjusted earnings per share of 96 cents in first-quarter fiscal 2020, beating the Zacks Consensus Estimate of 31 cents. This upside was mainly due to better-than-expected performance in the company’s Americas segment. Adjusted earnings per share in the year-ago quarter were 31 cents.
During the quarter under review, the company generated net sales of $3,936 million, down from $4,158 million in first-quarter fiscal 2019. However, the top line surpassed the Zacks Consensus Estimate of $3,840 million.
During the reported quarter, net sales in the Seat Structures & Mechanisms business totaled $2,265million, up from $2,201million in first-quarter of fiscal 2019. The Interior business generated net sales of $1,978 million, down from $2067 million in the prior-year quarter.
Adient currently operates through three reportable segments — Americas, which includes North America and South America; Europe, Middle East, and Africa (“EMEA”); and Asia Pacific/China ("Asia").
In the Americas, the company recorded revenues of $1,859 million, down 3.93% year over year. However, it surpassed the Zacks Consensus Estimate of $1,803 million. Adient generated adjusted EBITDA of $94 million in first-quarter fiscal 2020, indicating a rise from $43 million recorded in the prior-year period, primarily due to lower launch costs combined with decreased SG&A costs and lower commodity costs.
In EMEA, Adient registered revenues of $1,564 million, down 4.63% year over year. However, it beat the Zacks Consensus Estimate of $1,562 million. Its quarterly adjusted EBITDA was $49 million compared with $2 million in the prior-year quarter. The upside was due to lower launch costs along with decreased SG&A costs and lower commodity costs.
Revenues in the Asia segment were $572 million in first-quarter fiscal 2020 compared to $650 million in the same period in 2019.It also missed the Zacks Consensus Estimate of $573 million. The company’s adjusted EBITDA was $177 million compared with $154 million in first-quarter fiscal 2019, mainly aided by an increase in equity income.
Adient had cash and cash equivalents of $965 million as of Dec 31, 2019 compared with $924 million as of Sep 30 ,2019. As of the same date, long-term debt amounted to $3,740 million, up from $3,708 billion as of Sep 30, 2019. Debt-to-capital ratio stands at 68.21%. Capital expenditure declined to $91 million in first-quarter fiscal 2020 from $144 million recorded in the prior-year quarter.
For 2020, the company reaffirmed its guidance for consolidated sales at $15.6-$15.8 billion.
It expects adjusted EBITDA in the range of $870-$910 million, up from the prior guidance of $820-$860 million. Capital expenditures are anticipated between $440-$460 million, showing a rise from the prior range of $465-$485 million. Free cash flow is now expected to be positive versus the prior breakeven forecast.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -7.69% due to these changes.
At this time, Adient has a strong 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Adient has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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