Market Overview - The U.S. stock market is expected to remain volatile due to inflation concerns and policy uncertainty, impacting market sentiment [1] - It is advisable to invest in low-beta stocks to safeguard portfolios during this volatility [1] Beta Measurement - Beta measures the volatility of a stock relative to the market, with a beta of 1 indicating movement in line with the market [2][3] - Stocks with a beta greater than 1 are more volatile, while those with a beta less than 1 are less volatile [3] Stock Screening Criteria - Stocks with a beta between 0 and 0.6 are screened for lower volatility [4] - Additional criteria include positive price movement over the last month, average trading volume greater than 50,000, a minimum price of $5, and a Zacks Rank of 1 (Strong Buy) [5] Featured Low-Beta Stocks - **USA Compression Partners (USAC)**: Positioned to benefit from rising demand for cleaner fuels and plans to add new equipment by year-end, indicating growth potential [6][9] - **Futu Holdings (FUTU)**: A digital financial services provider experiencing rapid growth and increased client trust, expanding its global presence [7][9] - **Garrett Motion (GTX)**: A leading manufacturer of turbochargers focused on efficiency and emissions reduction, also exploring opportunities in advanced cooling technology for data centers [10][9]

Financial Data and Key Metrics Changes - Net sales for Q3 2025 were $902 million, up 6% at constant currency, reflecting outperformance in light vehicle turbo sales for both gasoline and diesel applications [7][14] - Adjusted EBIT was $133 million with an adjusted EBIT margin of 14.7%, which includes a 20 basis point dilution from tariff recoveries [8][17] - Adjusted free cash flow for the quarter was $107 million, contributing to a year-to-date total of $264 million [23] Business Line Data and Key Metrics Changes - Gasoline sales grew by 10% in the quarter, driven by demand gains and new product launches [8][16] - Diesel performance was strong in Europe and North America, although there was continued weakness in aftermarket applications, particularly in North America [16][51] - The company secured over $40 million in awards for commercial vehicles and industrial turbochargers, with expectations for sales exceeding $100 million in 2025 from these products [11] Market Data and Key Metrics Changes - The company experienced favorable foreign currency impacts, contributing to a 9% increase in net sales compared to the prior year [15] - There was a noted recovery of $12 million from tariffs within the quarter, which positively impacted financial results [16] Company Strategy and Development Direction - The company aims to leverage its capabilities to develop differentiated, high-speed, and highly efficient technologies to generate robust returns for shareholders [22] - There is a growing interest in developing turbochargers for hybrids and range-extended electric vehicles, with several awards secured for these technologies [10] - The company is focusing on zero-emission products, with significant progress in developing high-speed e Powertrain and oil-free centrifugal compressors [12][41] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the automotive industry's improved forecast for the second half of the year, leading to a raised 2025 outlook midpoint [8][21] - The company noted that while diesel is trending down slowly, it remains a strong business, particularly in light commercial vehicle applications [50][51] - Management highlighted the importance of capital allocation, committing to return 75% of adjusted free cash flow to shareholders over time through dividends and share repurchases [20][60] Other Important Information - The Board approved a 33% increase in the quarterly dividend to $0.08 per share for Q4 2025 [9][20] - The company repurchased $84 million worth of shares during the quarter, including shares from its largest shareholder [20] Q&A Session Summary Question: Can you elaborate on the volume mix and its geographic impact? - Management clarified that the mix impact is primarily due to strong growth in gasoline turbos and some weakness in the aftermarket, particularly in commercial vehicle applications [27][28] Question: What is the outlook for commercial vehicle performance? - Management indicated that while the outlook is generally soft, there are signs of stabilization in China, particularly in agricultural and construction equipment [31][32] Question: What is the path to achieving $1 billion in zero-emission technology revenue by 2030? - Management outlined three technologies contributing to this goal, emphasizing the growth potential in e Powertrain and e cooling compressors, with production expected to ramp up starting in 2027 [36][39] Question: Can you discuss the recovery seen in diesel? - Management noted a year-over-year recovery in diesel, particularly in North America, but acknowledged a long-term trend of declining diesel penetration in passenger vehicles [50][51] Question: What are the performance attributes of the e cooling technologies? - Management highlighted the efficiency, low noise, and weight advantages of their e cooling technologies, which leverage high-speed electric motors and airfoil bearing systems [66][68] Question: What should be expected regarding capital allocation moving forward? - Management reiterated their commitment to returning capital to shareholders while remaining flexible based on macroeconomic conditions [71][72]

Financial Performance - Net Sales reached $902 million, a 9% increase compared to Q3 2024, or 6% at constant currency[5, 9, 21] - Adjusted EBIT was $133 million with a 14.7% margin, up $16 million from Q3 2024[6, 9, 24] - Adjusted Free Cash Flow was $107 million[7, 16] Business Highlights - Light vehicle gasoline sales grew by 10%, outperforming the industry due to increased market share[9] - The company repurchased $84 million of common stock in Q3, bringing the year-to-date total to $136 million[10] - The Q4 dividend was increased by $0.02 per share to $0.08 per share[10] Outlook and Strategy - The midpoint outlook for 2025 has been raised, with Net Sales projected between $3.5 billion and $3.6 billion[7, 35] - The company is targeting to return 75% of Adjusted Free Cash Flow to shareholders over time[29] - The company expects over $100 million in sales from the industrial portfolio in 2025[41]

Financial Data and Key Metrics Changes - Net sales for Q2 2025 were $913 million, flat at constant currency, with gasoline turbo sales growing by 4%, outperforming the industry [6][13] - Adjusted EBIT was $124 million with a margin of 13.6%, reflecting a 20 basis point decline due to unfavorable sales mix and tariff dilution [7][15] - Adjusted free cash flow was $121 million, representing a conversion rate of 62% for the first half of 2025 [7][18] Business Line Data and Key Metrics Changes - Gasoline turbo sales showed strong growth, while diesel and aftermarket applications experienced softness, particularly in North America [14][28] - The company recovered $14 million in tariffs during the quarter, contributing positively to financial performance [14][15] Market Data and Key Metrics Changes - The company secured over $1 billion in light vehicle program extensions, enhancing future revenue visibility [8][24] - Interest in turbochargers for range-extended electric vehicles is growing, with new wins in China and Europe [9][10] Company Strategy and Development Direction - The company aims to leverage its capabilities to develop differentiated high-speed and highly efficient technologies, focusing on robust returns for shareholders [22][24] - A new R&D center in Wuhan, China, has been integrated to strengthen the company's presence in a fast-moving region [12] Management Comments on Operating Environment and Future Outlook - Management raised the 2025 outlook due to a stronger euro-dollar exchange rate, maintaining prior industry views despite tariff impacts [19][20] - The company remains alert to adapt to slowing demand if necessary, while continuing to allocate capital to deliver shareholder value [7][19] Other Important Information - The company repurchased $22 million of common stock and paid a $12 million quarterly dividend in Q2 2025 [8][18] - The Board of Directors declared a third-quarter dividend payable on September 16, 2025 [8][19] Q&A Session Summary Question: Unfavorable sales mix and business adjustments - Management explained that the unfavorable sales mix is due to strong growth in gasoline sales, which have lower margins, and softness in aftermarket applications in North America [27][28] Question: Cash position and stock buyback strategy - Management indicated that stock buybacks are not linear and emphasized their commitment to returning 75% or more of cash to shareholders over time [30][44] Question: Drivers of stronger operating performance in the second half - Management highlighted cost control and potential volume stabilization as key drivers for improved performance, while remaining conservative in guidance [33][34] Question: Tariff recovery expectations - Management confirmed expectations to fully recover tariff costs this year, having already achieved significant recovery [35][36] Question: Growth potential of large turbos for backup power - Management sees substantial growth potential in the large turbo market, estimating it could reach hundreds of millions in revenue within the next three to five years [40][42] Question: Non-linear stock repurchase strategy - Management reiterated that stock repurchase is not linear and emphasized their commitment to the capital allocation framework [44][45]

Financial Performance - Net sales reached $913 million, a 3% increase compared to Q2 2024, but flat at constant currency[6, 8, 21] - Adjusted EBIT was $124 million, up $1 million from Q2 2024, with a margin of 136%, a decrease of (20) bps[6, 8, 24] - Adjusted Free Cash Flow was $121 million, driven by sequential sales growth and working capital contribution[6, 18] Business Trends - Light vehicle gasoline sales grew 4%, outperforming the industry, driven by share of demand gains[8] - The company repurchased $22 million of common stock in Q2, bringing the total for H1 to $52 million[9] - A Q3 dividend of $006 per share was declared on July 24, 2025[9] Technology and Business Wins - Over $1 billion of light vehicle program extensions were awarded in North America and Europe[13] - The company won a significant E-Turbo program in Europe and 3 additional range extended electric vehicle applications in China[13] - The company won another Fuel Cell Compressor serial production program with a leading Asian OEM[13] Outlook - The company is raising its 2025 outlook, with net sales projected between $34 billion and $36 billion[32] - Adjusted EBITDA is projected between $590 million and $650 million, and Adjusted EBIT between $470 million and $530 million[32] - Adjusted Free Cash Flow is projected between $330 million and $410 million[32]

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]