What happened

Shares of Adient (NYSE:ADNT) fell 9.8% on Tuesday, after the company reported fiscal second quarter earnings that were below expectations, a clear indication that the challenges that the auto seating specialist face are not going to go away any time soon.

So what

Adient shares are down more than 70% since the beginning of 2018, with the company struggling through the launch of a new product line that led to higher labor and freight expenses. Wall Street is warming to the company under the leadership of new CEO Douglas DelGrosso, who joined in October, but the turnaround is clearly not going to happen overnight.

An Adient interior seating concept.

An Adient interior seating concept. Image source: Adient.

The company on Tuesday reported fiscal second quarter adjusted earnings of $0.31 per share, short of analyst expectations for $0.39 per share in earnings. The issue was expenses, as revenue, at $4.23 billion, was $10 million ahead of estimates.

DelGrosso on a call with investors said "there are no structural issues preventing Adient from achieving best-in-class margins" but added there were "significant operating challenges" that the company is now working to correct:

The team is really focused on the basics: changing our culture and mindset; fixing operational issues, which include the elimination of operational waste; a continued focus on SG&A savings should also be included in that bucket; commercial discipline, which I view as a high priority and, in fact, I'm personally involved in many of these discussions, which speaks to the importance of resolving them.

Now what

DelGrosso on the call said that "we expect to close the margin gap," though he said he's not yet ready to predict how long it will take. The good news is the company expects sales to remain strong, backing full-year fiscal 2019 revenue of between $16.5 billion and $16.7 billion, compared with consensus expectations for $16.6 billion. The company also expects the first half of fiscal 2019 to be the "low water mark" with regard to EBITDA, meaning that hopefully the worst is behind.

ADNT Chart

ADNT data by YCharts

Bottoming out is at least a step in the right direction. But until DelGrosso and Adient are ready to talk about earnings growth and make a firm prediction on when the company will get costs under control, this stock could struggle to get out of neutral.