Garrett Motion Inc. ( GTX ) shares are trading lower after the company reported worse-than-expected third-quarter results and reduced its FY24 net sales guidance.

Sales declined 14% (reported and constant currency basis) year-over-year to $826 million, missing the consensus of $851 million.

The decline was primarily due to weaker light vehicle sales caused by industry softness in Europe and China, competitive pressures on global OEMs, and short-term impacts from the customer vehicle platform mix.

Net sales were also affected by pricing, net of inflation pass-through, and commodity deflation.

Gross profit was $166 million, compared to $176 million last year, with a gross profit margin of 20.1% versus 18.3% a year ago.

Adjusted EBITDA declined to $144 million from $152 million on lower volumes, the impact of commodity deflation on pricing after accounting for inflation pass-through, and unfavorable foreign exchange effects.

Adjusted EBITDA margin increased to 17.4% compared to 15.8% prior year.  EPS of $0.24 missed the consensus of $0.29.

Operating cash flow totaled $67 million in the quarter, compared to $74 million a year ago. Adjusted free cash flow stood at $71 million versus $57 million a year ago.

As of September 30, 2024, Garrett had $696 million in liquidity, comprising $96 million in cash and $600 million in undrawn revolving credit. Total principal amount of debt outstanding totaled $1.495 billion.

The company repurchased $52 million of shares under the authorized share repurchase program, leaving a remaining repurchase capacity of $124 million as of September 30, 2024.

FY24 Outlook: Garrett lowered FY24 net sales guidance from $3.50 billion – $3.65 billion to $3.40 billion – $3.50 billion vs. an estimate of $3.56 billion and tightened adjusted EBITDA outlook from $583 million – $633 million to $585 million – $605 million.

Garrett now expects light vehicle production to be down 3% (vs. down 2% prior view) and commercial vehicle production to decline 1%, including on- and off-highway (vs. flat to down 1% earlier).

Olivier Rabiller, President and CEO of Garrett, said, “In the quarter, we continued to win across all turbo vehicle verticals. More specifically, our new range of large turbos enabled us to secure critical wins on gen-sets to serve the growing need for backup power generation equipment for data centers.”

”We have achieved significant progress this quarter with our high-speed electric powertrain solution, including closing important partnership agreements in the commercial vehicle space that will lead to mass production as early as 2027.”

Price Action: GTX shares are down 7.58% at $7.375 at the last check Thursday.

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