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01/11 13:56
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary and Q&A indicate strong financial health with a 33% dividend increase and significant share repurchases. The company's advancements in zero-emission technologies and stabilization in key markets provide optimism. Despite some margin dilution from tariffs, the overall outlook remains positive with a focus on shareholder returns and strategic partnerships. The market cap suggests a moderate reaction, leading to a predicted stock price increase of 2% to 8%.
Net Sales $902 million, up 6% at constant currency. Growth driven by outperformance in light vehicle turbo sales for gasoline and diesel applications, with gasoline sales growing by 10% due to share of demand gains.
Adjusted EBIT $133 million, representing a 14.7% margin, a 50 basis point improvement year-over-year. Increase driven by higher volumes, sustained fixed cost actions, and variable cost productivity, partially offset by unfavorable product mix and a 20 basis point decline due to newly implemented tariffs.
Adjusted Free Cash Flow $107 million, driven by increased volumes and efficient conversion of earnings into cash, partially offset by changes in working capital due to timing of payables and higher inventory.
Net Sales Growth Increased by $76 million year-over-year, or 9% on a reported basis and 6% on a constant currency basis. Growth attributed to favorable foreign currency impacts, strong gasoline growth, and new launches across Europe, China, India, and Brazil, partially offset by lower aftermarket demand in North America.
Liquidity Position $862 million, consisting of $630 million in undrawn capacity from revolving credit facility and $232 million in unrestricted cash. Improved due to reduced net leverage and private equity ownership.
Share Repurchase $84 million worth of shares repurchased during the quarter, including 5 million shares from Oaktree, the largest shareholder.
Dividend Increase 33% increase in quarterly dividend, rising from $0.06 to $0.08 per share for Q4, reflecting strong financial position.
Turbochargers for hybrids and range-extended electric vehicles: Secured several additional awards for these technologies.
Commercial vehicles and industrial turbochargers: Obtained several awards in various regions, including over $40 million for products supporting stationary power generation.
Zero-emission products: Secured additional proof of concepts with 2 OEMs in Japan and China for high-speed 3-in-1 E-Powertrain.
E-Cooling technology: Progressed with the development of oil-free centrifugal high-speed compressor technology for industrial and mobility applications.
Gasoline turbo sales: Grew by 10% in Q3, driven by share of demand gains and new launches in Europe, China, India, and Brazil.
Diesel turbo sales: Strong performance in Europe and North America, partially offset by lower aftermarket demand in North America.
Stationary power generation: Sales expected to exceed $100 million in 2025, driven by global expansion of data centers.
Adjusted EBIT: Achieved $133 million in Q3, with a margin of 14.7%, reflecting productivity gains and higher volumes.
Adjusted free cash flow: Delivered $107 million in Q3, driven by efficient earnings conversion into cash.
Share repurchase: Accelerated activity with $84 million of common stock repurchased in Q3.
Dividend increase: Board approved a 33% increase in quarterly dividend to $0.08 per share for Q4.
Zero-emission technologies: First series production award for high-speed E-Powertrain, showcasing substantial potential.
Debt management: Refinanced and repriced term loan, lowering interest by 75 basis points, and repaid $50 million of debt.
Capital allocation: Targeting 75% of adjusted free cash flow distribution to shareholders through dividends and share repurchases.
Automotive Industry Risks: The company acknowledges risks related to the automotive industry, including potential challenges in market conditions and competitive pressures.
Macroeconomic and Geopolitical Conditions: Uncertainties in macroeconomic and geopolitical conditions are highlighted as factors that could adversely impact the company's performance.
Aftermarket Weakness: Continued weakness in aftermarket applications, particularly in North America, is noted as a challenge.
Unfavorable Product Mix: The company faces challenges from an unfavorable product mix, which impacts profitability despite operational productivity gains.
Tariff Impacts: Newly implemented tariffs have caused a 20 basis point decline in the margin rate, posing a financial challenge.
Working Capital Changes: Changes in working capital, including timing of payables and higher inventory due to increased volumes, are identified as challenges affecting cash flow.
Debt and Leverage: Although the company has reduced net leverage and repaid $50 million of debt, managing debt levels remains a focus area.
2025 Outlook Midpoint: The company has raised its 2025 outlook midpoint due to an improved forecast for the automotive industry in the second half of the year and the impact of tariffs on sales and adjusted EBIT margin net of recovery. The revised outlook includes: Net sales of $3.55 billion (flat to +1% at constant currency), net income of $280 million, adjusted EBIT of $510 million, net cash provided by operating activities of $415 million, and adjusted free cash flow of $385 million.
Turbocharger and Zero-Emission Technologies: The company expects sales of industrial applications, including stationary power generation, to exceed $100 million in 2025. Additionally, Garrett has secured its first series production award for its high-speed E-Powertrain and sees strong momentum for its high-speed oil-free e-cooling centrifugal compressor technology, which has demonstrated significant efficiency gains in customer testing.
Dividend Increase: The Board approved a 33% increase in the quarterly dividend, raising it from $0.06 to $0.08 per share for Q4 2025, reflecting the company's strong financial position.
Quarterly Dividend Paid: $12 million
Dividend Increase: 33% increase to $0.08 per share for Q4 2025
Share Repurchase Activity: $84 million worth of common stock repurchased in Q3 2025
Total Share Repurchase Year-to-Date: $136 million worth of common shares repurchased through Q3 2025
The earnings call summary and Q&A indicate strong financial health with a 33% dividend increase and significant share repurchases. The company's advancements in zero-emission technologies and stabilization in key markets provide optimism. Despite some margin dilution from tariffs, the overall outlook remains positive with a focus on shareholder returns and strategic partnerships. The market cap suggests a moderate reaction, leading to a predicted stock price increase of 2% to 8%.
The earnings call highlights a stable financial performance with strong cash flow and shareholder returns through dividends and buybacks. Despite some margin pressures and currency risks, the company maintains a positive outlook with new wins and solid gasoline turbo sales growth. The Q&A reassures on cost recovery and operational performance, reinforcing confidence. The market cap suggests a moderate response, leading to a 'Positive' sentiment, predicting a 2-8% stock price increase.
Financial performance shows mixed results: a revenue decline but improved EBIT margins. Product development focuses on innovation, yet sales growth is negative. Market strategy is cautious due to geopolitical risks and competitive pressures. Expenses are managed well, with a solid liquidity position, but foreign exchange and tariff risks persist. Shareholder returns are positive with dividends and share repurchases. The Q&A highlights potential in North America and China but lacks clarity on Euro impact. Given the market cap, the stock price reaction is likely to be muted, resulting in a neutral sentiment.
The earnings call summary reflects mixed signals. Basic Financial Performance shows strong EBITDA margin but declining sales. Product Development has positive trends in zero emissions and commercial wins, but market strategy faces competitive and supply chain challenges. Expenses and Financial Health are stable with good liquidity, yet working capital impact is concerning. Shareholder Return Plan is positive with significant share repurchases. Q&A highlights industry softness and unclear guidance. Despite some positives like strong margins and share repurchases, overall uncertainty and market challenges lead to a neutral sentiment, predicting a stock price movement between -2% to 2%.
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