Adient (ADNT) is trading 6% lower after missing first quarter estimates this morning. Adient produces and delivers automotive seating for all vehicle classes and all major OEMs. The company's expertise spans every step of the automotive seat-making process. Adient was spun off from Johnson Controls (JCI) in late 2016.
First quarter adjusted EPS fell 48% to $1.06, below estimates, while revenue grew 4% to $4.2 billion. Benefits of the Futuris acquisition and China JV consolidation more than offset negative impact of lower volumes (primarily North America).
Headwinds for the Seat structures & mechanisms (SS&M) segment intensified in the first quarter, including launch inefficiencies and steel supply constraints. The company did warn about first quarter results in the segment two weeks ago.
ADNT's management team believes it is taking appropriate actions to help mitigate the near-term headwinds. Profit enhancement plans are being developed and executed while fundamental changes within SS&M are being rolled out to drive cultural and business changes.
The company reaffirmed fiscal 2018 sales of $17.0-17.2 billion but lowered adjusted net income guidance to $700-740 million from $940-980 million.
Despite temporary headwinds in SS&M significantly offsetting savings in SG&A, the company continues to expect 200 bps of margin improvement by the end of FY2020.
Adient has a $6.4 billion valuation and trades at ~9x adjusted earnings.