Why Garrett Motion Is Moving in Reverse Today

Autoparts manufacturer Garrett Motion (NASDAQ: GTX) reported mixed quarterly results and lowered full-year revenue guidance. Investors are slamming on the brakes, sending Garrett shares down 13% as of 11 a.m. ET.

A mixed quarter in a volatile environment

Garrett is a leading supplier of turbochargers, engine components that help automobiles operate more efficiently. The company earned $0.28 per share in the quarter on revenue of $890 million, a mixed bag compared to Wall Street's consensus estimate for $0.24 per share on sales of $990 million.

Sales were down about 12% year over year, and Garrett sees continued weakness up ahead. The company lowered its full-year revenue guidance by $300 million to a range of $3.5 billion to $3.65 billion, below the $3.88 billion Wall Street consensus.

Cost of goods sold fell by 12% from 2023, allowing gross profit margin to improve by 80 basis points.

"Despite a volatile volume environment in the second quarter, Garrett delivered a very solid performance," CEO Olivier Rabiller said in a statement. "We continued to deliver strong margin performance by leveraging our variable cost structure and driving sustained operating productivity."

Is Garrett Motion stock a buy?

Garrett, as a supplier, is subject to the ebbs and flows of the highly cyclical auto industry . Automakers are having trouble moving inventories right now and it is hitting results down the supply chain.

But for long-term focused investors, there was a lot to like. Garrett, a one-time subsidiary of Honeywell International , is a turnaround story, and the company is doing a good job getting its costs in order and putting cash to work.

Garrett repurchased $65 million of common stock in the quarter, bringing the total for the year up to $174 million. It also refinanced $800 million worth of debt at more favorable rates.

This is a company moving in the right direction. But until there is more clarity about the economy and auto sales, patience will be required.

Lou Whiteman has positions in Garrett Motion. The Motley Fool recommends Garrett Motion. The Motley Fool has a disclosure policy .