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Adient (ADNT) Down 7.4% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Adient (ADNT). Shares have lost about 7.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Adient due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Adient's Q4 Earnings Top, Sales Miss Estimates

Adient reported adjusted earnings per share of 63 cents in fourth-quarter fiscal 2019, beating the Zacks Consensus Estimate of 25 cents. Adjusted earnings per share in the year-ago quarter were $1.30.

During the quarter under review, the company generated net sales of $3,921 million, down from $4,145 million in fourth-quarter fiscal 2018. The top line also missed the Zacks Consensus Estimate of $3,962 million.

During the reported quarter, net sales in the Seat Structures & Mechanisms business totaled $1.92 billion, down from $2.22 billion in fourth-quarter fiscal 2018 due to reduction in auto production in China. The Interior business generated net sales of $1.89 billion, down from $1.99 billion in the prior-year quarter.

Segment Results

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 $1,925 million, down 3.3% year over year. It generated adjusted EBITDA of $64 million in fourth-quarter fiscal 2019 compared with $70 million recorded in the prior-year period. The plunge was attributed to negative business performance, lower volume and mix.

In EMEA, Adient’s quarterly adjusted EBITDA was $47 million compared with $55 million in the prior-year quarter. The downside was due to lower volume and product launch inefficiencies.

In Asia, the company’s adjusted EBITDA was $126 million compared with $146 million in fourth-quarter fiscal 2018. The decline was caused by lower volume and equity income.

Financials

Adient had cash and cash equivalents of $924 million as of Sep 30, 2019 compared with $687 million in the corresponding period of 2018. As of the same date, net debt amounted to $3.7 billion, up from $3.4 billion as of Sep 30, 2018. Debt-to-capital ratio stands at 66.7%. Capital expenditure declined to $118 million from $132 million recorded in the prior-year quarter.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -23.76% due to these changes.

VGM Scores

Currently, Adient has a subpar Growth Score of D, though it is lagging a bit 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 C. 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 looks promising. Notably, Adient has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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