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].

Financial Performance - Q4 2024 net sales were $844 million, and full year net sales were $3475 million, a decrease of 11% year-over-year for both periods[4] - Q4 2024 Adjusted EBITDA was $153 million, resulting in an 18.1% margin, while full year Adjusted EBITDA was $598 million, with a 17.2% margin[5] - Q4 2024 Adjusted Free Cash Flow was $157 million, and full year Adjusted Free Cash Flow was $358 million, representing a 60% conversion of Adjusted EBITDA to Adjusted Free Cash Flow for the year[6] Capital Allocation - The company returned 82% of Adjusted Free Cash Flow via share repurchases[10] - The company repurchased 13% of shares outstanding within the year[10] - Up to $250 million of share repurchases are authorized for 2025, along with a planned annual dividend of $50 million, paid quarterly[11] Business Highlights and Outlook - The company achieved a greater than 50% business win rate in light vehicle applications across all geographies, including plug-in hybrids and range extenders[12] - The company is expanding its portfolio of electrified solutions, including e-powertrain, fuel cell compressors, and e-cooling compressors[13, 16, 18] - The 2025 outlook includes net sales between $3300 million and $3500 million, representing a -3% to +2% growth at constant currency, and Adjusted EBITDA between $545 million and $605 million[45]

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].

Financial Performance - Net sales for Q4 2024 totaled $844 million, down 11% year-over-year, with a net income of $100 million and a net income margin of 11.8%[5]. - Full year 2024 net sales reached $3,475 million, a decrease of 11% from 2023, with adjusted EBITDA of $598 million and an adjusted EBITDA margin of 17.2%[5]. - Net income for the year ended December 31, 2024, increased to $282 million, compared to $261 million in 2023, resulting in earnings per share of $1.27[30][33]. - Net income for Q4 2024 was $100 million, up from $52 million in Q4 2023, resulting in a net income margin of 11.8% compared to 5.5% in the previous year[34]. - Adjusted EBITDA for Q4 2024 was $153 million, an increase from $145 million in Q4 2023, with an adjusted EBITDA margin of 18.1%, up from 15.3%[34]. - Full year 2025 outlook projects net income between $209 million and $254 million, with adjusted EBITDA expected to range from $545 million to $605 million[40]. Cash Flow and Liquidity - Adjusted free cash flow for 2024 was $358 million, enabling the company to repurchase $296 million of common shares, representing a 13% reduction in share count[4]. - Cash and cash equivalents at the end of Q4 2024 were $126 million, down from $260 million at the end of Q4 2023[33]. - The company reported a net cash provided by operating activities of $408 million for the year ended December 31, 2024, compared to $465 million in 2023[33]. - Adjusted free cash flow for 2025 is projected to be between $300 million and $390 million, with net cash provided by operating activities estimated at $357 million to $447 million[41]. Debt and Liabilities - As of December 31, 2024, total principal amount of debt outstanding was $1,493 million, down from $1,696 million in 2023, due to early debt repayments[18]. - Total liabilities decreased to $2,949 million as of December 31, 2024, from $3,262 million in 2023[32]. - Available liquidity as of December 31, 2024, was $725 million, including $125 million in cash and cash equivalents[17]. Future Projections - For 2025, the company projects net sales between $3.3 billion and $3.5 billion, with adjusted EBITDA expected to range from $545 million to $605 million[23]. - The 2025 outlook includes a forecast of flat to down 3% light vehicle industry production compared to 2024, and a commercial vehicle industry growth of 0% to 2%[26]. - The company anticipates a reported net sales change of -6% to 0% for 2025, with constant currency sales growth projected between -3% and 2%[39]. - Capital expenditures for 2025 are expected to be $94 million, impacting the net cash provided by operating activities[41]. - Stock compensation expense for 2025 is projected at $25 million, contributing to the adjusted EBITDA calculation[40]. - The company reported a foreign currency translation impact of -3% to -2% on net sales for 2025[39]. Investments and Strategic Initiatives - Research, development, and engineering investment is projected at 4.6% of sales in 2025, with over 50% allocated to zero-emission technologies[26]. - The company secured contracts for marine and back-up power with its largest turbocharger, set to start production in 2026, and entered a letter of intent with SinoTruk for e-powertrain systems by 2027[4]. - Garrett Motion is focusing on developing technology solutions for Zero Emission Vehicles, including fuel cell compressors and electric propulsion systems[28]. - The company plans to initiate a $50 million annual dividend and a new $250 million share repurchase program for 2025[4]. - The company repurchased $296 million of common stock during the year, reflecting a strategic move to enhance shareholder value[33]. Operational Metrics - Gross profit for the year ended December 31, 2024, was $705 million, down from $756 million in 2023, reflecting a gross margin of 20.2%[30]. - Total assets decreased to $2,276 million as of December 31, 2024, from $2,527 million in 2023[32]. - The company has five R&D centers and 13 manufacturing facilities, employing over 9,000 people globally[28]. - Constant currency sales for Q4 2024 showed a decline of 10%, while gasoline sales decreased by 8% and diesel sales decreased by 22%[37].