Core Insights - Garrett Motion is transitioning from a traditional turbo supplier to a cash-flowing entity with opportunities in electric vehicles (EV) and industrial sectors, indicating a strategic shift in its business model [1] - The stock of Garrett Motion is still considered a buy due to the ongoing relevance of turbochargers and internal combustion engines (ICE) in the market [1] Company Overview - Garrett Motion is focusing on enhancing its cash flow while diversifying into emerging markets such as EVs and industrial applications [1] - The company is leveraging its legacy in turbo technology while adapting to new market demands [1] Market Position - The relevance of turbochargers and ICE remains significant, which supports the investment thesis for Garrett Motion's stock [1] - The company is positioned to benefit from both traditional automotive markets and the growing EV sector, providing a balanced growth opportunity [1]

Core Insights - Garrett Motion Inc. and Shaanxi Hande Axle Co., Ltd. have signed a strategic agreement to co-develop advanced electric beam axle systems for medium and heavy-duty trucks, marking a significant milestone in the electrification of commercial transport [1][5][7] Company Overview - Garrett Motion is a leading differentiated automotive technology provider with a 70-year history of innovation in the automotive sector, focusing on turbocharging and electric propulsion technologies [10] - The company has established a strong presence in China since 1994, with advanced manufacturing facilities in Shanghai and Wuhan, and a dedicated R&D team of over 200 specialists [8][9] Strategic Partnership Details - The partnership aims to integrate Garrett's high-speed e-motor and inverter technology into HanDe's axle and transmission platforms, targeting production for 2027 [5][6] - Initial manufacturing will occur in Xi'an and Wuhan, with test fleets expected to begin field trials in 2026 as part of a global rollout strategy [6] Technological Advancements - Garrett's technology promises significant reductions in size and weight compared to current industry benchmarks, leading to lower total cost of ownership (TCO) for fleets through reduced energy use and maintenance [4] - The collaboration aims to minimize the use of rare earths and critical minerals, supporting sustainable sourcing and contributing to the local electrification ecosystem [4][7] Market Impact - The strategic partnership includes a multi-year production award from major Chinese commercial vehicle manufacturers, supporting both domestic output and international expansion [6] - There is strong interest from global commercial vehicle OEMs and fleet operators in adopting Garrett's E-powertrain solution due to its tangible TCO savings and sustainability benefits [4][7]

Core Insights - Garrett Motion Inc. is showcasing its latest innovations at Auto Shanghai 2025, including the debut of its 3-in-1 E-Powertrain and E-Cooling Compressor, which are pivotal for zero-emission mobility [1][4][10] Group 1: Technology Innovations - The 3-in-1 E-Powertrain integrates a high-speed electric motor, inverter, and reducer, achieving a size and weight reduction of up to 40% compared to industry standards [6] - The E-Cooling Compressor utilizes high-speed centrifugal technology for enhanced battery and cabin cooling, essential for the efficient operation of electric vehicles [6] - Garrett's Fuel Cell Compressor portfolio is the broadest and most mature in the industry, offering best-in-class efficiency and reliability [7] Group 2: Market Trends and Demand - Global production of new energy vehicles (NEVs) reached 18 million units in 2024, with China leading in adoption, driving demand for lightweight and efficient electric platforms [4] - By 2030, the market share of Plug-in Hybrid Electric Vehicles (PHEVs) and Range-Extended Electric Vehicles (REEVs) in China is expected to approach that of Battery Electric Vehicles (BEVs) [10] - In 2024, 75% of China's vehicle exports were powered by internal combustion engines (ICE), indicating continued relevance of ICE technologies alongside electrification [9] Group 3: Company Overview and Strategy - Garrett Motion has a 70-year history in automotive innovation, focusing on turbocharging technologies that reduce engine size, fuel consumption, and CO2 emissions [13] - The company operates five R&D centers and 13 manufacturing facilities globally, employing over 9,000 people [13] - Garrett is committed to advancing motion through differentiated technology solutions for zero-emission vehicles, including electric propulsion and thermal management systems [13]

Core Viewpoint - Garrett Motion Inc. is set to release its first quarter financial results on May 01, 2025, before the U.S. market opens [1] Financial Results Announcement - The financial results will be announced prior to market opening on May 01, 2025 [1] - A conference call will be held on the same day at 8:30 am EDT / 2:30 pm CET to discuss the results [2] Conference Call Details - Participants can join the conference call by dialing +1-877-883-0383 (U.S.) or +1-412-902-6506 (international) with passcode 2829687 [2] - The conference call will be webcast and include a slide presentation, accessible via the Investor Relations section of Garrett's website [3] - A replay of the conference call will be available through specific dialing options and access codes [3] Company Overview - Garrett Motion Inc. has a 70-year history in automotive technology, focusing on turbocharging and reducing engine size, fuel consumption, and CO2 emissions [4] - The company is developing technology solutions for Zero Emission Vehicles, including fuel cell compressors and electric propulsion systems [4] - Garrett operates five R&D centers, 13 manufacturing facilities, and employs over 9,000 people across more than 20 countries [4]

Company Overview - Garrett Motion (GTX) shares increased by 9.8% to $8.06 in the last trading session, following a period of 22.4% loss over the past four weeks, indicating a significant recovery in stock performance [1] - The company operates in the niche turbocharger market, benefiting from limited competition that helps protect profit margins [2] Financial Performance - Garrett Motion is expected to report quarterly earnings of $0.28 per share, unchanged from the same quarter last year, with revenues projected at $839 million, reflecting an 8.3% decline year-over-year [3] - The consensus EPS estimate for Garrett has remained stable over the last 30 days, suggesting that stock price movements may not sustain without trends in earnings estimate revisions [5] Market Position and Competitors - The recent stock gain is attributed to new business wins that underscore Garrett's technology leadership and support its expansion in the US and China [2] - Garrett Motion is part of the Zacks Automotive - Original Equipment industry, where another competitor, Denso Corp. (DNZOY), saw a 2.9% increase in its stock price, although it has returned -15.5% over the past month [5]

Core Viewpoint - Value investing remains a preferred strategy for identifying strong stocks across various market conditions, utilizing established valuation metrics to uncover potential opportunities [2][3]. Company Analysis - Garrett Motion (GTX) is highlighted as a strong value stock, currently holding a Zacks Rank of 2 (Buy) and an A for Value, with a Forward P/E ratio of 7.70, significantly lower than the industry average of 22.27 [4]. - GTX's Forward P/E has fluctuated between a high of 9.41 and a low of 6.04 over the past year, with a median of 7.31 [4]. - The P/S ratio for GTX stands at 0.58, slightly below the industry average of 0.6, indicating potential undervaluation [5]. - Strattec Security (STRT) is another notable value stock, rated 1 (Strong Buy) with a Value score of A, currently trading at a Forward P/E ratio of 13.36 and a PEG ratio of 1.34, both favorable compared to the industry averages [5][6]. - STRT's price-to-earnings ratio has ranged from a high of 26.50 to a low of 12.04, with a median of 16.39 over the past year [6]. - The P/B ratio for STRT is 0.92, significantly lower than the industry's price-to-book ratio of 3.72, suggesting it may be undervalued [7]. - STRT's P/B has varied between a high of 0.94 and a low of 0.40, with a median of 0.64 in the last 12 months [7]. Investment Outlook - Both Garrett Motion and Strattec Security exhibit strong value characteristics, indicating they are likely undervalued at present, supported by their positive earnings outlooks [7].

FEBRUARY 20, 2025 Q4 2024 FINANCIAL RESULTS © 2025 Garrett Motion Inc. Forward Looking Statements This communication and related comments by management may include "forward-looking statements" within the meaning of the U.S. federal securities laws. Forward-looking statements are any statements other than statements of historical fact and can be identified by words such as "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "shoul ...

Financial Data and Key Metrics Changes - The company reported fourth quarter net sales of $844 million, slightly up sequentially, stabilizing after declines over the past four quarters [19] - Adjusted EBITDA for Q4 was $153 million, an increase of $8 million from $145 million in the previous year, with an adjusted EBITDA margin of 18.1%, up from 15.3% [19][24] - Full year adjusted EBITDA was $598 million, representing a $37 million decrease from the prior year, with a full year adjusted EBITDA margin of 17.2%, up 90 basis points compared to the prior year [25][28] Business Line Data and Key Metrics Changes - The company experienced gasoline softness in China and North America, partially offset by ramp-ups in Europe, which comprised 45% of net sales [21] - Diesel decline in Q4 was mainly due to lower industry production in Europe, while commercial vehicle sales showed a slight increase, indicating the beginning of an industry recovery in China and North America [22] - The aftermarket business increased by 1% at constant currency due to continued demand for replacement parts, primarily in China and Europe [22] Market Data and Key Metrics Changes - The company noted a shift towards local Chinese players in the automotive industry, particularly in battery electric vehicles, plug-in hybrids, and range-extended electric vehicles [50][52] - The company is actively pursuing new technologies and products to meet the needs of these local players in China, indicating a growing market opportunity [51][53] Company Strategy and Development Direction - The company aims to strengthen its leadership position in the turbo industry while developing new technologies and expanding into industrial applications [38] - Investments in differentiated technologies, particularly in turbo and zero-emission applications, are expected to continue, with R&D spending increasing to 4.6% of sales in 2025 [34][36] - A new $250 million share repurchase program has been authorized for 2025, alongside a plan to pay $50 million in dividends throughout the year [12][30] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by geopolitical factors and tariffs but emphasized the company's flexibility and quick response to market changes [45][46] - The outlook for 2025 includes net sales of $3.4 billion, with adjusted EBITDA expected to be $575 million, reflecting an improvement in the commercial vehicle market while anticipating continued softness in the light vehicle industry [33][34] - The company expects to maintain strong margins and free cash flow in 2025, supported by structural cost actions implemented in 2024 [41] Other Important Information - The company ended 2024 with a strong liquidity position of $725 million, significantly improving financial flexibility [28] - Total debt was reduced by $203 million in 2024, with a net leverage ratio remaining relatively flat at 2.21 times [28] Q&A Session Summary Question: How is the company managing geopolitical and tariff challenges? - Management emphasized the importance of flexibility and quick reactions to unplanned events, indicating a proactive approach to navigating these challenges [45][46] Question: Can you provide more details on the business in China? - Management highlighted the shift towards local Chinese players and the company's efforts to engage with new brands and products, particularly in hybrid and electric vehicle segments [50][52] Question: How is adjusted free cash flow defined? - Adjusted free cash flow is defined as operating cash flow less capital expenditures, excluding repositioning and one-time charges [60][61] Question: What is the company's stance on M&A opportunities? - Management stated that while they are actively looking at M&A opportunities, they prioritize organic growth strategies and have a high bar for any potential acquisitions to avoid diluting shareholder value [66][68]

Core Viewpoint - Garrett Motion reported strong quarterly earnings, significantly exceeding expectations, indicating potential growth and positive market sentiment towards the company [1][2]. Financial Performance - The company achieved earnings of $0.47 per share, surpassing the Zacks Consensus Estimate of $0.26 per share, and up from $0.22 per share a year ago, reflecting an earnings surprise of 80.77% [1][2]. - Revenues for the quarter were $844 million, exceeding the Zacks Consensus Estimate by 5.24%, although down from $945 million in the same quarter last year [3]. Market Position and Outlook - Garrett Motion's stock has increased by approximately 2.7% since the beginning of the year, underperforming compared to the S&P 500's gain of 4.5% [4]. - The company's earnings outlook is favorable, with current consensus EPS estimates of $0.28 for the upcoming quarter and $1.25 for the current fiscal year, alongside revenues of $841 million and $3.51 billion respectively [8]. Industry Context - The Automotive - Original Equipment industry, to which Garrett Motion belongs, is currently ranked in the bottom 37% of over 250 Zacks industries, suggesting potential challenges ahead [9]. - The performance of Garrett Motion's stock may be influenced by the overall industry outlook, as historical data indicates that the top 50% of Zacks-ranked industries outperform the bottom 50% by more than 2 to 1 [9].

Financial Performance - In 2024, net income was $282 million and adjusted EBITDA was $598 million, despite a global decrease in turbocharger production from approximately 50 million units in 2023 to 49 million units in 2024 [191]. - Total net sales for 2024 were $3,475 million, a decrease of $411 million or 11% compared to 2023, primarily due to soft demand in gasoline, diesel, and commercial vehicle applications [201]. - Gross profit for 2024 was $705 million, a decrease of $51 million from the previous year, mainly due to lower sales volumes [212]. - Adjusted EBITDA for the year ended December 31, 2024, decreased by $37 million compared to the prior year, mainly due to soft demand across all product lines except aftermarket [236]. - The company reported a decrease in gross profit of $51 million for the year ended December 31, 2024, impacting net income despite other positive factors [228]. Sales and Demand - Diesel product sales decreased by $165 million or 17% in 2024, driven mainly by passenger vehicle demand in Europe [203]. - Gasoline product sales decreased by $215 million or 13% in 2024, impacted by soft demand in China and North America [202]. - The company experienced a decline in demand for gasoline, diesel, and commercial vehicle applications during 2024, partially offset by favorable demand in aftermarket for replacement parts in North America, China, and Europe [237]. Expenses and Costs - Cost of goods sold decreased by $360 million in 2024, primarily due to lower sales volumes and commodity deflation [211]. - For the year ended December 31, 2024, selling, general and administrative (SG&A) expenses decreased by $7 million to $240 million, representing 6.9% of sales [215]. - SG&A expenses for the year ended December 31, 2023, increased by $31 million to $247 million, primarily due to legal and advisory fees related to a transaction [216]. - Interest expense for the year ended December 31, 2024, decreased by $3 million to $156 million, primarily due to $24 million of higher gains on interest derivatives [217]. Investments and Dividends - The Board of Directors announced plans to declare and pay quarterly dividends totaling approximately $50 million in 2025 [195]. - The company expects capital spending to increase slightly in 2025 compared to 2024, driven by investments in new product launches [248][262]. - The company repurchased $296 million of its Common Stock during the year ended December 31, 2024, under a $350 million share repurchase program [251]. Cash Flow and Liquidity - Cash provided by operating activities decreased by $57 million for the year ended December 31, 2024, primarily due to a $32 million change in working capital [255]. - Liquidity overview shows cash and cash equivalents decreased to $125 million in 2024 from $259 million in 2023 [246]. - Cash used for financing activities increased by $117 million in 2024, primarily due to $992 million in debt repayments [257]. Tax and Non-Operating Income - The effective tax rate for 2024 decreased to 24.8% from 17.8% in 2023, primarily due to releases of reserves and settlements with taxing authorities [224]. - Non-operating income, net for the year ended December 31, 2024, increased to $13 million compared to $2 million in the prior year, driven by a $13 million loss on remeasurement of Series A Preferred Stock Agreements in the prior year [220]. Currency and Interest Rate Risk - As of December 31, 2024, the net fair value of all financial instruments with exposure to currency risk was a $87 million asset, with a potential loss or gain of $196 million from a hypothetical 10% change in currency exchange rates [282]. - The net fair value of all financial instruments with exposure to interest rate risk was a $6 million asset as of December 31, 2024, with a 50 basis point increase in interest rates potentially increasing interest expense by $4 million [283][284]. - Approximately 83% of the cost of sales consists of purchased components with significant raw material content, with a 10% variation in commodity prices potentially impacting cost of sales by up to $43 million per year [285].