Is Adient’s guidance cut a positive sign for the auto suppliers?

Key Points

• Adient is the world's largest automotive seat manufacturer, serving major automotive manufacturers like General Motors, Ford, Stellantis, Toyota, and Volkswagen.
• Adient lowered its fiscal Q1 2024 earnings forecast, but shares rallied as markets expected worse.
• Adient expects to improve sales and margins in fiscal 2024.

Adient PLC NYSE: ADNT is one of the largest manufacturers of automotive seating and interior systems in the world. The company designs complete seat systems, including seat frames, foam cushions, mechanisms, and the actual seats. They also offer door and instrument panels, overhead systems and center consoles. Adient supplies seats and components to all the major automakers, including General Motors Co. NYSE: GM, Ford Motor Co. NYSE: F, Stellantis N.V. NYSE: STLA, Volkswagen AG OTCMKTS: VWAGY, BMW, Tesla Inc. NASDAQ: TSLA and Toyota Motor Co. NYSE: TM. Adient is a member of the Auto/Tires/Trucks sector.

Priced for sluggish automotive sales.

The United Auto Workers (UAW) strike of 2023 has made investors nervous about its results. Many automakers had to curb production lines, causing a slowdown during the negotiations and an inventory glut of components. Investors expect the worst from its upcoming Q4 2023 earnings report, which will be released before the market opens on February 7, 2024. However, the company provided an update on January 22, 2024, causing shares to surge 4%, staging a sustained rally despite trimming guidance. Check out the sector heatmap on MarketBeat.

Preliminary downside guidance

Adient issued downside guidance for fiscal Q1 2024 for the period ending December 2023. The company expects revenues of $3.70 billion versus $3.76 consensus analyst estimates. This represents flat YoY growth from the year-ago period. Adjusted EBITDA is expected to be around $215 million versus $212 million in the year-ago period.

While the guidance was trimmed, it wasn't as bad as investors expected. Shares have been in a downtrend, and investors may have breathed a sigh of relief that the downside guidance wasn't worse considering the impacts of the UAW strike. In-line revenue was seen as positive. More importantly, investors may have focused more on the CEO's statement that earnings and margins would improve in the full fiscal year 2024. Get AI-powered insights on MarketBeat.

Adient CEO Doug Del Gross commented, "Building on the momentum established in 2023, Adient's preliminary Q1 results demonstrate we are off to a solid start in FY24 despite the UAW strike-related production stoppages at certain of our customers in the Americas... We continue to expect improved earnings and margin in FY24 vs. FY23."

Impact on auto suppliers

The sigh of relief was also felt among some of the other auto parts and components suppliers. Shares of original equipment manufacturer (OEM) parts supplier Magna International Inc. NYSE: MGA,  turbocharger and emissions systems provider BorgWarner Inc. NYSE: BWA, and drive systems supplier Dana Inc. NYSE: DAN all experienced a rise on Adient's press release. Investors should pay close attention to the automaker's earnings releases for more direction. General Motors will release its earnings on January 30, 2024, ahead of the opening bell. General Motors is expected to report EPS of $1.16 on revenues of $30.809 billion. On January 3, 2024, A press release was issued updating investors that General Motors had delivered 2.3 million vehicles in the United States in 2023, up 14% YoY. General Motors forecast 2024 momentum to continue forecasting 16 million vehicle sales in the United States.

Adient analyst ratings and price targets are at MarketBeat. Adient peers and competitor stocks can be found with the MarketBeat stock screener.

Ascending triangle breakdown to Death Cross

The daily candlestick chart for ADNT depicts a descending triangle breakout pattern. The daily descending trendline started after peaking at $37.19 on December 27, 2023. ADNT shares continued to sell off, capping each bounce at a lower high until it reached the flat bottom lower trendline at a $31.77 swing low on January 16, 2024. The daily market structure low (MSL) trigger formed a breakout through $32.58 on January 19, 2024, as the daily relative strength index (RSI) bounced back up through the 50-band. The January 22, 2024, announcement for lower fiscal Q1 2024 earnings caused shares to rally through the daily 50-period moving average resistance, which has now turned into a support near $34.05. ADNT surged after gapping to a peak of $35.89 in the following days. Pullback support levels are at $34.05 daily 50-period moving average, $32.59 daily MSL trigger, $30.53 and $28.50.