Overlooked Stock: GTX Gearing Up for New Highs

Company Overview - Garrett Motion has seen its shares rally to a six-year high, primarily due to better-than-expected earnings, an increased dividend, and a boosted outlook [1][4][5] - The company operates within the automotive sector, focusing on building superchargers to improve fuel efficiency for both OEMs and aftermarket [3] Financial Performance - For Q2, Garrett Motion reported revenue of $92 million, reflecting a 9.2% growth compared to the previous quarter's 2.5% growth [4][5] - Earnings per share (EPS) increased to 38 cents, up from 24 cents year-over-year [5] - The company announced an increased share buyback and hiked its dividend payout, indicating confidence in its financial position [5] Guidance and Market Position - Garrett Motion narrowed its 2025 revenue guidance to $3.5 billion to $3.6 billion, aligning more closely with street estimates [6] - Year-to-date, the company's stock has risen approximately 40%, with a forward price-to-earnings (PE) ratio now closer to 11, up from 6 at the beginning of the year [7][8] Growth Drivers - The company experienced robust gasoline segment sales growth of 10%, contributing to share gains [9] - The EBIT was reported at $133 million, with margins around 14.7% [9] Challenges and Risks - Despite the positive performance, there are concerns regarding continued weakness in the aftermarket business and an unfavorable product mix impacting margin growth potential [9][10] - The company is also facing potential disruption in its core turbocharger business due to the shift towards electric vehicles (EVs) and zero-emission technologies [12][13] Future Outlook - Garrett Motion is diversifying into electric and electrified powertrain systems, with production of electric motors set to begin in 2027 [12][13] - The company recognizes the need for R&D to remain relevant amid the transition towards EVs [13]