Garrett Motion Soars: Net Income Up 48% on Strong Sales Growth

Ticker: GTX · Form: 10-Q · Filed: 2025-10-23T00:00:00.000Z

Sentiment: bullish

Topics: Automotive Suppliers, Turbochargers, Electrification, Emission Reduction, Q3 Earnings, Share Repurchase, Global Mix of Earnings

Related Tickers: GTX, HON, BWA, MBLY

TL;DR

**GTX is firing on all cylinders, with surging profits and smart capital allocation making it a buy.**

AI Summary

Garrett Motion Inc. reported a strong financial performance for the three and nine months ended September 30, 2025. Net sales increased by 9.2% to $902 million for the three months ended September 30, 2025, up from $826 million in the prior year, and by 2.4% to $2,693 million for the nine months, compared to $2,631 million in 2024. Net income saw a significant jump, rising 48.1% to $77 million for the three-month period from $52 million, and 24.2% to $226 million for the nine-month period from $182 million. Basic earnings per common share increased to $0.39 from $0.24 for the quarter and to $1.12 from $0.80 for the nine months. The effective tax rate decreased to 24.5% for the quarter and 21.8% for the nine months, primarily due to lower U.S. taxes on international operations and a one-time benefit from the revaluation of deferred tax assets in China. Cash and cash equivalents significantly increased to $230 million as of September 30, 2025, from $125 million at December 31, 2024, driven by $314 million in net cash provided by operating activities for the nine months. The company also repurchased $136 million of Common Stock during the nine months ended September 30, 2025.

Why It Matters

Garrett Motion's robust performance, marked by significant increases in net sales and net income, signals strong operational execution and demand for its turbocharging and E-Powertrain technologies. This positive trend could attract more investors, potentially driving up GTX's stock price. For employees, continued growth may lead to job security and expansion opportunities, especially in the E-Powertrain and E-Cooling segments. Customers benefit from Garrett's continued investment in R&D, with $118 million spent on research and development costs in the nine months, ensuring cutting-edge solutions for emission reduction and energy efficiency. In a competitive landscape increasingly focused on electrification, Garrett's strategic pivot and strong financial health position it well against rivals in the automotive supplier market.

Risk Assessment

Risk Level: medium — While Garrett Motion shows strong financial performance, its total liabilities of $3,249 million significantly exceed total assets of $2,436 million, resulting in a total deficit of $813 million as of September 30, 2025. This substantial deficit, coupled with long-term debt of $1,460 million, indicates a leveraged balance sheet. Additionally, the company's exposure to foreign exchange translation adjustments, which resulted in an $85 million loss for the nine months ended September 30, 2025, presents ongoing currency risk.

Analyst Insight

Investors should consider initiating or increasing a position in GTX, given the strong net income growth of 48.1% for the quarter and 24.2% for the nine months, alongside effective tax rate management. However, they should closely monitor the company's substantial total deficit and long-term debt, and assess its ability to generate sufficient free cash flow to manage these liabilities and continue its share repurchase program.

Financial Highlights

debt To Equity
N/A
revenue
$902M
operating Margin
N/A
total Assets
$2,436M
total Debt
$1,467M
net Income
$77M
eps
$0.39
gross Margin
186/902 = 20.6%
cash Position
$230M
revenue Growth
+9.2%

Revenue Breakdown

SegmentRevenueGrowth
Total Net Sales$902M+9.2%
Total Net Sales$2,693M+2.4%

Key Numbers

Key Players & Entities

FAQ

What were Garrett Motion's net sales for the third quarter of 2025?

Garrett Motion Inc. reported net sales of $902 million for the three months ended September 30, 2025, an increase from $826 million in the same period of 2024.

How did Garrett Motion's net income change in the nine months ended September 30, 2025?

For the nine months ended September 30, 2025, Garrett Motion's net income increased to $226 million, up from $182 million in the prior year, representing a 24.2% increase.

What was Garrett Motion's basic earnings per share for the third quarter of 2025?

Garrett Motion's basic earnings per common share for the three months ended September 30, 2025, was $0.39, an increase from $0.24 in the corresponding period of 2024.

What factors influenced Garrett Motion's effective tax rate in 2025?

The effective tax rate for the nine months ended September 30, 2025, was 21.8%, primarily influenced by a one-time benefit from the revaluation of deferred tax assets in China and lower U.S. taxes on international operations.

How much cash and cash equivalents did Garrett Motion have as of September 30, 2025?

As of September 30, 2025, Garrett Motion Inc. reported cash and cash equivalents of $230 million, a significant increase from $125 million at December 31, 2024.

What is Garrett Motion's strategic outlook regarding electrification?

Garrett Motion is applying its technological pillars to develop highly engineered E-Powertrain and E-Cooling compressor products to support customer electrification ambitions, which are key enablers for fuel economy and emissions compliance.

What is the primary risk associated with Garrett Motion's balance sheet?

A primary risk is the company's total deficit of $813 million and long-term debt of $1,460 million as of September 30, 2025, indicating a highly leveraged financial position.

How much did Garrett Motion spend on share repurchases in the first nine months of 2025?

Garrett Motion repurchased $136 million of Common Stock during the nine months ended September 30, 2025, demonstrating its commitment to returning capital to shareholders.

What new accounting pronouncements did Garrett Motion adopt or evaluate?

Garrett Motion adopted ASU 2023-09, 'Improvements to Income Tax Disclosures,' as of January 1, 2025, and is evaluating ASU 2024-03 and ASU 2025-06, as well as the SEC's climate-related disclosure rule.

What kind of products does Garrett Motion Inc. design and manufacture?

Garrett Motion designs, manufactures, and sells highly engineered turbocharging, air and fluid compression, and high-speed electric motor technologies for OEMs and distributors in the mobility and industrial sectors, including products for internal combustion engines and zero-emission technologies.

Risk Factors

Industry Context

Garrett Motion Inc. operates in the automotive technology sector, primarily focusing on turbochargers and electric-hybrid propulsion systems. The industry is characterized by intense competition, rapid technological advancements driven by electrification and emissions regulations, and a strong reliance on global automotive production volumes. Key trends include the shift towards electric vehicles (EVs) and the increasing demand for advanced powertrain solutions.

Regulatory Implications

The company is subject to various regulations, including environmental standards impacting emissions control technologies and safety regulations for automotive components. Changes in global emissions standards (e.g., Euro 7, EPA regulations) can directly influence demand for Garrett's products and necessitate ongoing investment in R&D. Compliance with international trade and tax laws is also critical, as evidenced by the impact of U.S. taxes on international operations.

What Investors Should Do

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Key Dates

Glossary

Net sales
The total revenue generated from the sale of goods and services after deducting returns, allowances, and discounts. (Key indicator of the company's top-line performance and market demand for its products.)
Gross profit
Revenue minus the cost of goods sold. (Measures the profitability of the company's core operations before considering operating expenses.)
Effective tax rate
The actual percentage of pre-tax income that a company pays in taxes. (Impacts net income and can be influenced by various tax regulations and company strategies.)
Cash and cash equivalents
Highly liquid investments that can be readily converted into cash. (Indicates the company's short-term liquidity and ability to meet immediate financial obligations.)
Long-term debt
Financial obligations that are due more than one year from the balance sheet date. (Represents the company's leverage and long-term financing structure.)
Equity (Deficit)
The residual interest in the assets of an entity after deducting all its liabilities. A deficit means liabilities exceed assets. (Indicates the company's net worth; a deficit suggests potential financial distress.)
Weighted average common shares outstanding
The average number of common shares outstanding during a period, adjusted for dilutive securities. (Used to calculate earnings per share (EPS).)

Year-Over-Year Comparison

Compared to the prior year's reporting periods, Garrett Motion Inc. has demonstrated robust growth in net sales, with a 9.2% increase in the third quarter of 2025 to $902 million and a 2.4% increase for the nine months to $2,693 million. Net income has seen even more substantial improvements, rising 48.1% to $77 million for the quarter and 24.2% to $226 million for the nine months. The effective tax rate has also decreased, contributing to higher net income. While cash and cash equivalents have significantly increased from $125 million at the end of 2024 to $230 million as of September 30, 2025, the company continues to carry substantial long-term debt of $1,460 million and a negative equity position, which remain key areas of focus.

Filing Stats: 5,013 words · 20 min read · ~17 pages · Grade level 16 · Accepted 2025-10-23 07:03:40

Key Financial Figures

Filing Documents

Financial Statements (Unaudited)

Financial Statements (Unaudited) 2 Consolidated Interim Statements of Operations (Unaudited) 2 Consolidated Interim Statements of Comprehensive Income (Unaudited) 3 Consolidated Interim Balance Sheets (Unaudited) 4 Consolidated Interim Statements of Cash Flows (Unaudited) 5 Consolidated Interim Statements of Equity (Deficit) (Unaudited) 6 Notes to Consolidated Interim Financial Statements ( Unaudited ) 8 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 27 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 38 Item 4.

Controls and Procedures

Controls and Procedures 39 PART II. OTHER INFORMATION 40 Item 1.

Legal Proceedings

Legal Proceedings 40 Item 1A.

Risk Factors

Risk Factors 40 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 40 Item 3. Defaults Upon Senior Securities 40 Item 4. Mine Safety Disclosures 40 Item 5. Other Information 41 Item 6. Exhibits 41

Signatures

Signatures 43 1

—FINANCIAL INFORMATION

PART I—FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements GARRETT MOTION INC. CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 (Dollars in millions, except per share amounts) Net sales (Note 3) $ 902 $ 826 $ 2,693 $ 2,631 Cost of goods sold 716 660 2,147 2,108 Gross profit 186 166 546 523 Selling, general and administrative expenses 57 53 175 178 Other expense, net 1 1 9 5 Interest expense 29 37 83 130 Gain on sale of equity investment (Note 22) — — — ( 27 ) Non-operating income, net ( 3 ) ( 1 ) ( 10 ) ( 7 ) Income before taxes 102 76 289 244 Tax expense (Note 5) 25 24 63 62 Net income $ 77 $ 52 $ 226 $ 182 Earnings per common share Basic $ 0.39 $ 0.24 $ 1.12 $ 0.80 Diluted 0.38 0.24 1.10 0.80 Weighted average common shares outstanding Basic 198,668,143 217,283,749 202,127,953 226,057,803 Diluted 202,194,334 218,403,681 205,130,616 227,649,747 The Notes to the Consolidated Interim Financial Statements are an integral part of this statement. 2 GARRETT MOTION INC. CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 (Dollars in millions) Net income $ 77 $ 52 $ 226 $ 182 Foreign exchange translation adjustment 3 ( 30 ) ( 85 ) ( 12 ) Defined benefit pension plan adjustment, net of tax — 1 — 4 Changes in fair value of effective cash flow hedges, net of tax (Note 16) 5 4 24 5 Changes in fair value of net investment hedges, net of tax (Note 16) 5 ( 31 ) ( 158 ) ( 4 ) Total other comprehensive income (loss), net of tax 13 ( 56 ) ( 219 ) ( 7 ) Comprehensive income (loss) $ 90 $ ( 4 ) $ 7 $ 175 The Notes to the Consolidated Interim Financial Statements are an integral part of this statement. 3 GARRETT MOTION INC. CONSOLIDATED INTERIM BALANCE SHEETS (Unaudited) September 30, 2025 December 31, 2024 (Dollars in millions) ASSETS Current assets: Cash a

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