Adient: Driving Gains in China
05/12/2017 2:50 am EST
We like Adient PLC (ADNT) for management’s focus on lower costs, the company’s low tax rate, and large dominant share of China’s auto market, explains value investor Charles Mizrahi, editor of Hidden Values Alert.
On April 28, ADNT released its quarterly earnings — and management’s focus on controlling costs is starting to impact the bottom line.
Adjusted earnings increased, and the one-time costs for the company spinoff from Johnson Control will not drag down the bottom line going forward.
ADNT also raised its full-year adjusted earnings number and has decreased its debt load by $400 million, from $3 billion to $2.6 billion.
It is very possible that ADNT would be able to generate $9 per share in earnings over the next year. With the stock currently trading at $70, that comes out to 8x forward earnings.
While we don’t use estimates of future earnings to determine value, we have increased our estimate of intrinsic value to $68–$70 per share based on the company’s latest quarterly numbers. We are increasing our "buy at or below" price for ADNT from $65 to $69.