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Why Shares of Adient Were Higher in January

By Lou Whiteman - Updated Feb 7, 2020 at 2:30PM

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Blowout quarterly results give investors reason to hope the company's turnaround plan is working.

What happened

Shares of Adient (ADNT 3.60%) rose 21% in January, according to data provided by S&P Global Market Intelligence, with the entire gain coming on the final day of the month. Adient shares were actually down nearly 10% for the month prior to the automotive seating specialist's quarterly earnings release.

ADNT Chart

ADNT data by YCharts

So what

Adient reported fiscal first-quarter earnings of $0.96 per share on Jan. 31 before markets opened, well ahead of the $0.34-per-share Wall Street consensus. On a post-earnings call with investors, CEO Doug DelGrosso said that the company is following through on its pledge to bring down costs, especially the expense surrounding new product launches, and do more with fewer resources.

An Adient interior seating concept.

Image source: Adient.

"The results build on the positive momentum established in the second half of last year and demonstrate that an improvement phase of our turnaround plan is solidly on track," DelGrosso said.

The company said that launch costs dropped by about 40% and 50% year over year in the Americas and Europe, respectively, and operational waste dropped by more than 30%.

Investors were concerned about Adient and other auto suppliers, fearful that a combination of weakening U.S. automotive demand and the impact of the coronavirus on the supply chain would cut into growth. But Adient provided guidance that allayed those fears, saying it expects full-year EBITDA of $870 million to $910 million compared to Wall Street's $842 million estimate.

Now what

Adient has a history of dramatic stock moves since being spun out of Johnson Controls in 2016, as investors react to changing sentiment about automotive demand and company-specific pricing and cost issues.

There are still a number of macro issues outside of Adient's control, including new car demand and issues related to the coronavirus. But the latest numbers provide reason to hope that the turnaround is working and the company at long last has a handle on the internal issues it can control. If so, Adient can hold on to its gains this time around.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool recommends Adient. The Motley Fool has a disclosure policy.

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