Morningstar | Adient Announces Some Full-Year Metrics Early, Complete Results Coming Nov. 9
Adient is reporting full fiscal 2018 fourth-quarter results on Nov. 9 but it announced some full-year fiscal 2018 metrics on Oct. 19. Full-year revenue will be about $17.4 billion, slightly below guidance of $17.5 billion. Guidance for adjusted free cash flow excluding benefits of an accounts receivable factoring facility was for $0 to negative $100 million and actual will be about $0. Adient is slightly missing its adjusted EBITDA guidance for the full year, with actual coming in at about $1.2 billion versus $1.25 billion guided. This variance is not that dramatic in our view and nothing in this press release gives us reason to change our fair value estimate.Problems continue to be in all areas of the company but the seat structures and mechanisms, or SS&M, group is the main problem. Adient needs operational excellence and that is what we hope new president and CEO, Doug DelGrosso, will bring given his time as president and COO of Lear, CEO of two smaller auto suppliers, and as a former general manager at TRW. DelGrosso, 56, only started on Oct. 1 so it will take at least well into fiscal 2019 for him to have an impact on Adient's results, in our view. We continue to think Adient's stock is very cheap but it will likely remain undervalued for a long time while the company executes its cost reduction measures and rolls out its new mechanisms product lineup over the next few years.
We think Adient's problems are fixable, and we see opportunities in nonauto markets, particularly high-end airplane passenger seats via a new joint venture with Boeing that began operations this month after receiving regulatory approval. The company does not have a major debt maturity until 2021, so it has time to fix its execution problems.
Morningstar Select clients can read more about our thoughts on Adient's problems and its potential in autonomous vehicles and aerospace in our June 28 report "Narrow-Moat Adient Is Trading as if It Will Never Get Better."
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