Garrett Motion Inc. (GTX) shares took a significant hit on Thursday, plunging 7.58% to $7.375, following the company’s release of worse-than-expected third-quarter results and a lowered outlook for the full year 2024. The news sent shockwaves through the market, leaving investors concerned about the company’s future prospects.
The primary driver behind the share price decline was the company’s disappointing performance in the third quarter. Revenue came in at $826 million, falling short of analyst estimates of $851 million and representing a 14% drop year-over-year, both on a reported and constant currency basis. The decline was attributed to a combination of factors, including weakened light vehicle sales in key markets like Europe and China, heightened competitive pressure from other automakers, and shifts in customer vehicle platform mix.
Garrett’s net sales were further impacted by pricing adjustments, taking into account inflation pass-through, and commodity deflation. Despite the revenue miss, the company did report an increase in gross profit margin, reaching 20.1% compared to 18.3% in the same period last year. However, adjusted EBITDA declined to $144 million from $152 million, primarily due to lower sales volumes, the impact of commodity deflation on pricing after accounting for inflation pass-through, and unfavorable foreign exchange rates.
Looking ahead, Garrett lowered its full-year 2024 net sales guidance from $3.50 billion to $3.65 billion to a range of $3.40 billion to $3.50 billion. This revised outlook falls below the consensus estimate of $3.56 billion. Additionally, the company tightened its adjusted EBITDA guidance from $583 million to $633 million to a range of $585 million to $605 million.
The company’s outlook for the automotive industry remains cautious. Garrett now expects light vehicle production to decline by 3%, a steeper drop than the previously projected 2%. Commercial vehicle production is anticipated to decrease by 1%, encompassing both on- and off-highway vehicles, compared to the earlier expectation of flat to down 1%.
Despite the challenges, Garrett highlighted its successes in securing new wins across various turbo vehicle verticals. The company’s new range of large turbos played a key role in securing critical wins on gen-sets, catering to the growing demand for backup power generation equipment for data centers.
Furthermore, Garrett emphasized its significant progress in developing high-speed electric powertrain solutions, including entering into important partnership agreements in the commercial vehicle sector. These partnerships are poised to pave the way for mass production of these solutions as early as 2027.
While the current market environment poses challenges for Garrett, the company remains focused on its long-term strategy of delivering innovative solutions for the automotive industry. The company’s commitment to developing advanced turbocharging technologies and electric powertrain solutions positions it for potential growth in the future, but investors will be closely watching for signs of improvement in the coming quarters.