How Is Adient Expected To Perform In The Next Year?

-0.16%
Downside
65.10
Market
64.99
Trefis
JCI: Johnson Controls logo
JCI
Johnson Controls

Adient is a global leader in automotive seating and interiors, providing its products to all major automobile manufacturers. It is expected to begin operating as an independent company, and trade on the New York Stock Exchange under the symbol ADNT on October 31, 2016, when the spin-off from Johnson Controls (NYSE:JCI) is to be completed. At its recent analyst day, the company provided an outlook for FY 2017 (year ended September 2017), which has been summarized below:

Adient FY 2017

Click here to see our complete analysis of Johnson Controls

Alex Molinaroli, CEO of Johnson Controls, cited two reasons for the spin-off. The cyclical nature of the auto industry wreaked havoc on the company’s cash flows. Furthermore, the enormous capital investment needed by the seating business was not something JCI was willing to make. Dedicated capital and cash flow will ensure flexibility for the company to come up with a targeted capital allocation strategy, and to deliver smarter reinvestment opportunities, including for M&A. This will, in turn, increase the value for shareholders and customers. In the future, Adient will aim to attain a leaner cost structure, as it will only be focused on automotive seating. As a result, the company expects 200 basis points of margin improvement, along with double-digit EPS growth over the medium-term. The company’s leading market position, together with a well-diversified revenue base, will ensure growth in the future. The company also has an industry leading position in China, unarguably one of the fastest growing markets in this industry. This region is considered a key growth driver, with the company leveraging its position in the country, to outpace the overall market growth. Adient has 17 seating joint ventures in China, operating 60 manufacturing locations in 32 cities. This results in high profitability and strong cash flow generation, with 65%-70% of the annual JV equity income paid as cash dividends in prior years.

As an independent company, Adient also plans to increase its investments into innovative products and technology, including the company’s seating development work to meet emerging trends, such as autonomous driving, electrification, slim and lightweight seating, and consumer personalization. Furthermore, the company will also look into opportunities in new markets, outside of its traditional auto markets, such as in commercial vehicle, passenger train, and aircraft seating.

Adient Drivers

Have more questions on Johnson Controls? See the links below:

Relevant Articles
  1. Q4’23 Earnings Preview: Down 21% YTD Will Johnson Controls Stock Continue To Underperform?
  2. What’s Next For Johnson Controls Stock After An 8% Fall Yesterday?
  3. Margin Expansion To Drive Johnson Controls’ Q3?
  4. What’s Next For Johnson Controls Stock After An Upbeat Q2?
  5. Here’s What To Expect From Johnson Controls’ Q2
  6. Here’s What To Expect From Johnson Controls’ Q1

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Johnson Controls.

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research