Adient Earnings: CEO Retirement Is Earlier Than We'd Like, but We Think the Successor Is up to the Task

Adient's stock fell by over 11% during Nov. 8 trading following fiscal 2024 fourth-quarter adjusted EPS of $0.51, missing the $0.58 Refinitiv consensus, somewhat disappointing fiscal 2024 guidance, and news that CEO Doug Del Grosso, 62, is retiring from the company and the board on Dec. 31. Although guidance of adjusted EBITDA around $985 million, including a $25 million hit from the UAW strike, is below the $1.1 billion we were modeling, we feel the sell-off is too punitive given Adient's attractive long-term prospects. Fiscal 2024 guidance is a headwind to our thesis, but not enough to change our mind that the stock is significantly undervalued. We will reassess all model inputs after the 10-K. For the quarter, the UAW strike took about $30 million in revenue and less than $5 million in adjusted EBITDA. The fiscal 2024 revenue impact from the strike through Nov. 3 is estimated at about $125 million.