Garrett Motion Q1 Earnings Call Highlights

Garrett reported a strong Q1 with $985 million in net sales (up 6% at constant currency), $151 million of Adjusted EBIT (a 15.3% margin) and $49 million of adjusted free cash flow, and it raised the midpoint/high end of its 2026 outlook to about $3.75 billion in sales, $560 million Adjusted EBIT and $415 million adjusted free cash flow.

Management continued shareholder returns and maintained strong liquidity, repurchasing $87 million of stock and paying $16 million in dividends in Q1, while ending the quarter with $772 million of liquidity and a net leverage ratio of 1.92x.

Garrett secured multiple technology wins across turbos and zero‑emission products, including a second China e‑powertrain production award (medium‑duty trucks) and a major industrial compressor win with TONFY, with initial oil‑free compressor testing for Trane expected in the coming weeks and production planned in 2027.

Garrett Motion Inc. Skids on Results: Is it Time to Buy the Dip?

Garrett Motion (NASDAQ:GTX) reported what executives described as a “very strong” start to 2026, citing growth across product verticals, improved profitability, and continued shareholder returns, even as light vehicle production declined during the quarter.

First-quarter results: sales growth and margin improvement

President and CEO Olivier Rabiller said the company’s first-quarter performance was “driven by growth in a muted industry and disciplined operational execution.” Net sales were $985 million, up 6% at constant currency. Rabiller said growth was broad-based, including commercial vehicles and industrial, and he attributed light-vehicle outperformance to “share of demand gains in passenger vehicles.”

On profitability, Garrett reported Adjusted EBIT of $151 million, translating to an Adjusted EBIT margin of 15.3%. Rabiller said productivity actions and execution helped convert sales growth into operating performance. The company also posted adjusted free cash flow of $49 million in the quarter.

Senior Vice President and CFO Sean Deason said the quarter reflected “sequential growth across all verticals,” driven by share gains in diesel and gasoline applications, a recovery in commercial vehicle volumes, and continued demand for industrial applications. Deason added that the 15.3% margin improved both year over year and sequentially, aided by “strong volume conversion and favorable foreign exchange.”

Deason said net sales increased $107 million versus the prior-year period, representing 12% growth on a reported basis and 6% at constant currency. He highlighted double-digit growth in commercial vehicle, industrial, and aftermarket as key contributors, alongside “continued gasoline share of demand gains and new launches in diesel.”

Management also outlined regional drivers:

North America: Growth was led by off-highway, industrial, and aftermarket.

Europe: Garrett saw share-of-demand gains in light-vehicle gasoline and diesel, along with a recovery in off-highway applications.

China: Growth was driven primarily by industrial and on-highway applications.

On earnings, Deason said Adjusted EBIT increased by $20 million year over year. The margin improvement included a 40 basis point year-over-year increase, with 20 basis points attributed to favorable foreign exchange, “partially offset by tariff pass-throughs.” He said the EBIT increase was primarily volume- and mix-driven, supported by growth in commercial vehicle, industrial, and aftermarket.

Deason noted that year-over-year “operating performance was slightly negative,” citing timing effects and the early phase of productivity execution. He said the company expects operating performance to turn positive through the remainder of 2026 as Garrett benefits from fixed-cost actions and variable-cost productivity.

Cash flow, liquidity, and shareholder returns

Garrett’s adjusted free cash flow of $49 million aligned with full-year expectations, according to Deason. He said working capital use in the quarter was “primarily driven by our strong sales” and is expected to be recovered throughout the year.

At quarter-end, Garrett reported $772 million of liquidity, consisting of $630 million of undrawn revolver capacity and $142 million in unrestricted cash. Deason said the company had “no near-term debt maturities,” and that the net leverage ratio remained unchanged versus the prior quarter at 1.92x.

Garrett continued returning capital to shareholders. During the first quarter, the company repurchased $87 million of common stock under its $250 million share repurchase program, reducing the share count to approximately 188 million, and paid $16 million in quarterly dividends. Deason said the company targets returning “approximately 75% of our Adjusted free cash flow to shareholders over time” through dividends and share repurchases, with buybacks varying based on conditions. The board declared a second-quarter dividend of $0.08 per share, payable in June.

Technology wins: turbos, e-powertrain, and compressors

Rabiller emphasized progress across Garrett’s technology portfolio, including new wins in both traditional turbo offerings and zero-emission technologies. He said the company “continue[s] to win across our turbo portfolio with multiple gasoline awards,” including variable nozzle turbine (VNT) turbo wins for hybrids and range-extended EV applications.

In industrial, Rabiller said Garrett secured additional wins “including for large power generation applications.” He also highlighted progress in zero-emission technologies, including what he described as the company’s “second commercial vehicle E-Powertrain production award in China,” with production planned to begin in 2027.

Rabiller also said Garrett won “a major production award” for its industrial cooling compressor with TONFY in China, which he described as “a leading supplier for battery energy storage system cooling solutions.” He said the win validates the compressor technology beyond the scope discussed previously in connection with Trane.

During Q&A, Nathan Jones of Stifel asked for an update on the oil-free compressor and the timeline for shipping initial units to Trane. Rabiller said “shipping the first unit for testing and everything will happen in the coming weeks,” reiterating that production is expected in 2027. He said Garrett has seen “a lot of inbounds” from the industry following an air conditioning congress in Las Vegas and additional exhibits, including in China.

When asked about exclusivity terms with Trane, Rabiller did not provide specifics, but said the company is “talking to a broad industry scope with a broad industry applications,” adding that “the interest goes beyond what we’ve announced with Trane.”

Jones also asked for more detail on the second China E-Powertrain award. Rabiller said it is “not exactly for the same application” as the first award, which was heavy-duty; this one is for “trucks that are more on the medium duty size.” He called the win “very significant,” but said the company would not share numbers. He also referenced Garrett’s partnership with HanDe, describing it as “the biggest player of the industry when it comes to transmissions in China and the axles.”

2026 outlook raised on the high end; investor day planned

Based on the first-quarter performance, Garrett increased the midpoint and high end of its 2026 outlook ranges while maintaining the low end due to uncertainty. Deason said industry assumptions were unchanged, but Garrett expects to benefit from light-vehicle share-of-demand gains, ongoing recovery in commercial vehicles, and industrial growth “particularly for stationary power generation.”

Deason said the updated 2026 outlook implies these midpoints:

Net sales:$3.75 billion (about 2% growth at constant currency)

Adjusted EBIT:$560 million (about a 14.9% margin)

Adjusted free cash flow:$415 million

Asked by Jake Scholl of BNP about profitability running near the high end of guidance, Rabiller said the company was “very pleased” with Q1 results, adding that Garrett had not seen a “material impact” from the war in the Middle East on the business so far, but said it would be “a little bit too bullish” to provide an outlook disconnected from broader global uncertainty.

On industrial growth tied to power generation, James Mulholland of Deutsche Bank asked for an update on progress and the magnitude of expected growth. Deason said industrial was flat sequentially but is expected “to grow significantly,” reiterating expectations for “low double digits.” Rabiller added that commercial vehicle was a significant contributor to growth, while industrial also remains on a growth trajectory.

Rabiller said Garrett will provide additional detail at its 2026 Technology and Investor Day in New York City on May 20, where the company plans to outline “the next phase of the company’s strategic evolution,” including turbo, zero-emission vehicle, and industrial technologies. In response to a question about breaking out zero-emissions sales, Rabiller indicated more information would be disclosed in the coming weeks.

About Garrett Motion (NASDAQ:GTX)

Garrett Motion Inc is a technology leader specializing in the design, development and manufacture of turbocharging systems and related technologies for the global automotive industry. Its product portfolio includes conventional exhaust gas turbochargers, variable-geometry turbochargers, electric and e-boost turbochargers, as well as electronic actuators, sensors and thermal management systems. The company’s solutions are engineered to improve engine efficiency, reduce emissions and support automakers’ efforts to meet evolving regulatory standards for fuel economy and air quality.

Garrett Motion traces its roots to the founding of AiResearch by Cliff Garrett in 1936, a pioneer in aircraft and automotive turbocharging technologies.