Why Is Adient (ADNT) Up 14% Since Last Earnings Report?

A month has gone by since the last earnings report for Adient (ADNT). Shares have added about 14% 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 Q3 Loss Wider Than Expected

Adient reported adjusted loss per share of $2.78 in third-quarter fiscal 2020, wider than the Zacks Consensus Estimate of $2.11. The company had reported earnings of 38 cents in the year-ago quarter. This dismal performance mainly resulted from lower year-over-year revenues across all of the company’s segments.

During the reported quarter, Adient generated net sales of $1,626 million, down from the $4,219 million recorded in third-quarter fiscal 2019, mainly hurt by disappointing volume and mix due to production suspensions amid the coronavirus crisis. The top-line figure also missed the Zacks Consensus Estimate of $1,635 million.

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 $593 million, which slumped 70.5% year over year. The reported figure, however, beat the Zacks Consensus Estimate of $561 million. Adient reported adjusted negative EBITDA of $83 million in the fiscal third quarter, as against the profit of $69 million recorded in the prior-year period, primarily due to soft industry volumes, partially offset by decreased SG&A costs.

In EMEA, the company registered revenues of $698 million, significantly down 60.2% year over year. However, the revenue figure surpassed the Zacks Consensus Estimate of $542 million. Its quarterly negative EBITDA came in at $94 million, as against the prior-year quarter’s profit of $53 million. This downside resulted from bleak industry volumes, partially negated by lower SG&A costs.

Revenues in the Asia segment came in at $346 million in the reported quarter compared with the year-earlier quarter’s $530 million. The figure, however, beat the Zacks Consensus Estimate of $274 million. The company’s adjusted EBITDA was $71 million compared with the $110 million reported in third-quarter fiscal 2019 on lackluster industry volumes, slightly muted by an increase in seating equity income.

Financials

Adient had cash and cash equivalents of $1,032 million as of Jun 30, 2020, compared with $924 million as of Sep 30, 2019. As of the same date, long-term debt amounted to $4,147 million, up from $3,708 billion as of Sep 30, 2019. Capital expenditure declined to $73 million in the fiscal third quarter from the $98 million recorded in the prior-year quarter.

Outlook

For fourth-quarter fiscal 2020, Adient expects revenue of $3.3-$3.5 billion. Adjusted EBITDA is anticipated in the band of $180-$200 million. Moreover, it expects free cash flow in the range of $300-$400 million in the quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

At this time, Adient has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Adient has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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