What Garrett Motion (GTX) Said on Its Q3 Earnings Call

Key Points

• Q3 results improved: Garrett Motion reported $930 million in sales, up 3% year over year, while adjusted EBIT rose to $152 million and the margin expanded to 16.3%. Adjusted free cash flow reached $136 million.
• Commercial and industrial demand drove growth: These segments grew 23% organically, with power-generation demand prompting Garrett to raise expected industrial sales to approximately $230 million in 2026 and $300 million in 2027.
• Outlook and shareholder returns remain supportive: Garrett reaffirmed its 2026 guidance, including $3.8 billion in sales, $580 million in adjusted EBIT and $430 million in adjusted free cash flow. The company also authorized a new $250 million share-repurchase program for 2027 and continued debt reduction.

Garrett Motion NASDAQ: GTX reported third-quarter 2026 net sales of $930 million, up 3% both on a reported and constant-currency basis, as growth in commercial vehicle, industrial and aftermarket applications helped offset a still-variable automotive production environment.

Adjusted EBIT rose $19 million from a year earlier to $152 million, producing a 16.3% adjusted EBIT margin. The margin increased 160 basis points year over year, despite a 70-basis-point unfavorable foreign-exchange impact, according to Senior Vice President and Chief Financial Officer Sean Deason. The company generated $136 million of adjusted free cash flow during the quarter, equal to an 89% conversion of adjusted EBIT.

President and CEO Olivier Rabiller said the results reflected organic sales growth, margin expansion and favorable product mix. Garrett also cited a $13 million year-over-year operating-performance improvement during the quarter.

Commercial Vehicle and Industrial Demand Support Growth

Garrett said commercial vehicle and industrial sales posted 23% organic growth year over year. Deason noted that quarterly reported sales growth included a negative three-point impact from tariff pass-throughs.

Industrial demand, particularly for power-generation applications, continued to exceed the company’s earlier expectations. Garrett now expects industrial sales of approximately $230 million in 2026 and about $300 million in 2027. Rabiller told analysts that the expected 2027 industrial sales total will be mostly from generator-set, or genset, applications, while E-Cooling Compressor revenue is expected to begin ramping and represent a smaller portion of industrial revenue that year.

The company said its industrial sales outlook for 2027 represents roughly 30% organic growth, primarily driven by power-generation demand. Rabiller said Garrett would provide a more updated long-term outlook for genset sales at a later point, while cautioning that the market remains dynamic.

During the quarter, Garrett launched a high-volume E-Turbo program with Mercedes, secured multiple light-vehicle awards including hybrid and China domestic and export programs, and won several commercial-vehicle programs across regions. The company also launched an off-road turbo application for recreational vehicles with Polaris.

Zero-Emission Technology Programs Advance

Garrett said it completed multiple light-vehicle E-Powertrain proof-of-concept tests, which it said validated the benefits of its high-speed architecture. The company is also continuing testing and industrialization for heavy-duty commercial-vehicle E-Powertrain applications ahead of a planned 2027 launch.

Industrial cooling testing remains on track for 2027 launches, management said. Garrett announced an industrial E-Cooling Compressor award with Multistack, a new customer. Rabiller said the agreement covers several products and use cases, with deliveries expected to begin in 2027. However, he said it was too early to quantify the opportunity because the technology’s adoption curve and customer program mix remain in flux.

Rabiller also said field testing with Trane had confirmed the company’s performance expectations relative to existing solutions. Garrett is working with customers to determine the pace of product introductions, applications and program deployment, he said.

Deason said industrial turbo products currently benefit from favorable margins because the company has established capacity and experience in producing large turbos. He added that HVAC products also carry favorable margin potential due to Garrett’s differentiated offering, though the company expects more significant contribution as sales volumes ramp, particularly beyond 2030. Management said it intends to remain within its previously stated financial framework as it invests in capacity.

Capital Returns and Balance Sheet

Garrett repurchased $57 million of common stock during the third quarter and paid $15 million in dividends. Year-to-date repurchases totaled $172 million under the company’s existing $250 million authorization.

The board authorized a new $250 million share-repurchase program for 2027 and declared a fourth-quarter dividend of $0.08 per share, payable in December.

The company ended the quarter with $841 million of total liquidity, including $630 million of available revolver capacity and $211 million of unrestricted cash. In October, Garrett voluntarily repaid $50 million of term-loan debt, bringing year-to-date repayments to $100 million.

Garrett said more than 95% of its debt is fixed or swapped into euros, with an all-in cash interest rate of about 5.5%, accounting for cross-currency swap proceeds. Net leverage was 1.66 times, lower than the prior quarter, and the company said it has no near-term debt maturities.

2026 Outlook Reaffirmed

Garrett reaffirmed the midpoint of its full-year 2026 outlook, while narrowing its guidance ranges across metrics. The company said stronger operating execution is expected to support higher expectations for adjusted EBIT and adjusted free cash flow, but those improvements are being offset by foreign-exchange headwinds concentrated mainly in the fourth quarter.

• Net sales midpoint: $3.8 billion, representing 4% constant-currency growth
• Adjusted EBIT midpoint: $580 million
• Adjusted EBIT margin midpoint: 15.3%
• Adjusted free cash flow midpoint: $430 million
• Adjusted free cash flow conversion midpoint: 74%

Looking toward 2027, Rabiller said Garrett has the greatest visibility into industrial growth but remains cautious about the broader automotive environment. He said regional conditions in Europe and Asia remain fluid, while the company continues to position its cost structure conservatively. Garrett also said it is already generating sales from turbochargers installed in Chinese vehicles exported outside China and expects that exposure to grow as it secures additional business wins.

About Garrett Motion (NASDAQ:GTX)

Garrett Motion Inc is an automotive technology company that develops and manufactures solutions designed to improve vehicle performance, efficiency and emissions. Its products serve passenger vehicles, commercial vehicles and off-highway applications, supporting both internal-combustion and electrified powertrains.

The company is best known for its turbocharging technologies, including turbochargers and related air-management systems. Garrett also develops electric boosting systems, fuel-cell compressors, thermal-management products and other components intended to support hybrid, electric and fuel-cell vehicles.

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