Investor faith somewhat returned in automotive seating manufacturer Adient (US:ADNT) last Friday with shares rallying 14.2% over the day following the company’s fourth-quarter update which included the announcement of a new share buyback.
For the final quarter of fiscal year 2022, Aident grew revenues by 32% to $3.65 billion from $2.77 billion in the prior year. The result came in marginally ahead of market forecasts expecting around $3.55 billion.
The group’s costs also expanded during the year but at a much slower pace of 23% to $3.37 billion.
As a result, the group’s adjusted EBITDA grew by $157 million over the year to $227 million and beat analyst forecasts by around ~15%.
At the bottom line, Aident’s net income swung from a -$23 million loss to a $51 million profit equating to earnings per share of 53 cents. At an EPS level, ADNT beat consensus forecasts 48 cents by just over 10%.
In addition to the result, Aident announced a $600 million share repurchase program with no expiration program. The firm discussed that after the last few years with a focus of debt repayment, ADNT now expects to achieve its net debt to adjusted EBITDA target of 1.5-2x which provides the board with the flexibility to engage in other capital management activities.
Looking ahead to the next year, management discussed how the company is entering FY23 in a strong position and expects earnings, margin and free cash flow growth to continue over the next year.
Management provided guidance to the market with the expectation that they will grow revenue to around $14.7 billion. The guidance represents growth of 4.1% over FY22 or 10.1% when adjusting for FX headwinds. The sales figure was marginally below the street’s $15 billion forecast.
The company also expects adjusted EBITDA to expand from $675 million in 2022 to around $850 million in 2023 and will represent around ~600 basis points of growth above the market.
ADNT also expects to generate free cash flow of around $200 million with capital expenditures of around $300 million and interest expenses of $160 million.
Emmanuel Rosner from Deutsche Bank Securities post result discussed that while the FY23 guidance came in below consensus expectations, it was likely above some of the lowest investor expectations across the street. Deutsche remains ‘buy’ rated on the stock with a $39 price target.
On average, ADNT has a consensus ‘overweight’ rating and an average $38 price target in the market. This target may possibly change in the short term as analysts incorporate the new guidance into future forecasts.
The Fintel quant platform also suggests the company has experienced above average levels of institutional interest and buying activity.
This is explained by an ownership accumulation score of 62.81 which ranks ADNT in the top 30% of companies with the highest level of institutional accumulation when screened against 34,560 other global securities.
Adient has a total of 591 institutions on the register that own 115.6 million shares of the float. Some of the larger institutions include: Capital World Investors, Hotchkis & Wiley Capital Management, Lyrical Asset Management, Dimensional Funds and State Street Corp.
The chart provided shows the growing level of institutional interest over time for ADNT against the share price.
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