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Adient (ADNT) Down 12% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Adient (ADNT - Free Report) . Shares have lost about 12% 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 Earnings Lag Estimates in Q2

In second-quarter fiscal 2019, Adient’s adjusted earnings per share were 31 cents, missing the Zacks Consensus Estimate of 39 cents. The adjusted bottom-line figure in the year-ago quarter was $1.82 per share.

Reportedly, quarterly net loss attributable to the company was $149 million compared with net loss of $168 million in the prior-year quarter.

During the quarter under review, it reported net sales of $4.23 billion, marking a decline from $4.6 billion recorded in second-quarter fiscal 2018. However, the top line surpassed the Zacks Consensus Estimate of $4.12 billion.

During the reported quarter, Adient’s Seating, and Seat Structures & Mechanisms (SS&M) segments’ net sales were $1.92 billion, down from $2.3 billion in second-quarter fiscal 2018. Further, the Interior segment reported net sales of $1.94 billion, down from $2.3 billion in the prior-year quarter.

Segment Results

During the second quarter, the company realigned its organizational structure to manage business on the basis of geographical regions. The three reportable segments that Adient currently operates are the Americas, which includes North America and South America; Europe, Middle East, and Africa ('EMEA"); and Asia Pacific/China ("Asia").

In the Americas, the company generated adjusted EBITDA of $34 million in second-quarter fiscal 2019 compared with $98 million recorded in the prior-year quarter. This plunge was due to lower volume and mix along with increased SG&A and product launch costs.

In EMEA, Adient’s quarterly adjusted EBITDA was $59 million compared with $130 million in the prior-year quarter. This plunge was due to lower volume, negative impact of foreign currencies and product launch inefficiencies.

In Asia, the company’s quarterly adjusted EBITDA was $123 million compared with $157 million in the second quarter of fiscal 2018. This decline was due to lower volume and equity income.

Financials

Adient had cash and cash equivalents of $491 million as of Mar 31, 2019, compared with $687 million as of Sep 30, 2018. As of the same date, net debt amounted to $2.9 billion, up from $2.7 billion as of Sep 30, 2018.

In the second quarter, cash inflow by operating activities was $168 million against an outflow of $23 million in the same period of fiscal 2018. Capital expenditure declined to $108 million from $123 million recorded in the prior-year quarter.

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 -49.53% due to these changes.

VGM Scores

At this time, Adient has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Adient has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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