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A month has gone by since the last earnings report for Adient (ADNT). Shares have added about 29.8% 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 catalysts.
Adient's Q2 Earnings & Revenues Surpass Estimates
Adient reported adjusted earnings per share of 62 cents in second-quarter fiscal 2020, beating the Zacks Consensus Estimate of 32 cents. The figure was also higher than the year-ago quarter’s 31 cents. Theupside mainly resulted from better-than-expected performance in the company’s EMEA and Asia segments.
During the reported quarter, Adient generated net sales of $3,511 million, down from $4,228 million in second-quarter fiscal 2020. However, the top line surpassed the Zacks Consensus Estimate of $3,497 million.
During the fiscal second quarter, net sales in the Seat Structures & Mechanisms business totaled $1,214 million, down from $1,920 million reported in second-quarter fiscal 2019 mainly due to lower vehicle production in China.
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 $1,641 million, down 14.3% year over year. The metric also missed the Zacks Consensus Estimate of $1,779 million. Adient generated adjusted EBITDA of $106 million in the fiscal second quarter, indicating a rise from $34 million recorded in the prior-year period, primarily owing to lower launch costs combined with decreased SG&A costs and low commodity costs.
In EMEA, the company registered revenues of $1,488 million, down 16.3% year over year. However, it beat the Zacks Consensus Estimate of $1,385 million. Its quarterly adjusted EBITDA was $62 million compared with the prior-year quarter’s $59 million. Theupside resulted from lower launch costs along with decreased SG&A costs.
Revenues in the Asia segment were $444 million in the reported quarter compared with the year-earlier quarter’s $599 million. The metric, however, beat the Zacks Consensus Estimate of $413 million. The company’s adjusted EBITDA was $63 million compared with $123 million reported in second-quarter fiscal 2020 due to a significant reduction in China production volume amid the coronavirus crisis.
Adient had cash and cash equivalents of $1,640 million as of Mar 31, 2020,compared with $924 million as of Sep 30,2019. As of the same date, long-term debt amounted to $3,717 million, up from $3,708 billion as of Sep 30, 2019. Long-term debt-to-capital ratio stands at 70.7%. Capital expenditure declined to $94 million in the fiscal second quarter from $108 million recorded in the prior-year quarter.
Adient scrapped the 2020 guidance as it expects the coronavirus pandemic’s impacts to strain its operations in the days to come.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted 11.94% due to these changes.
Currently, Adient has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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.
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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