Garrett Motion (NASDAQ: GTX) has shed approximately 11.6% since its most recent earnings report, underperforming the broader S&P 500 over the same period.
The decline has raised questions among investors about whether the stock is due for a reversal or faces continued downward pressure heading into its next earnings release.
Garrett reported second-quarter 2026 earnings of 53 cents per share, beating the Zacks Consensus Estimate of 46 cents by 15.2%, with earnings climbing 26.2% from 42 cents in the year-ago quarter.
Net sales rose 6.9% year over year to $976 million, surpassing the consensus estimate of $964 million by 1.2%, supported by growth across all product verticals and productivity gains.
Adjusted EBIT margin expanded 200 basis points to 15.6%, reflecting a favorable business mix and operational efficiencies across the company’s divisions.
Gasoline sales advanced 5% year over year, with new application launches and program ramp-ups in Europe, India, and South America providing meaningful support to the category.
Diesel sales increased 8%, driven by light commercial vehicle and pickup truck demand across Europe, Asia, and South America, along with program ramp-ups in India.
Commercial vehicle and industrial sales climbed 10% year over year, with strong on-highway demand in China and higher North American genset activity for data centers contributing significantly to the result.
Industrial turbo sales exceeded $80 million during the first half, and the business is now expected to generate approximately $200 million in full-year sales, supported by power-generation demand.
Gross profit increased to $212 million from $181 million, with gross margin improving to 21.7% from 19.8%, as volume growth and productivity more than offset commodity, transportation, and energy inflation.
Adjusted EBIT rose $28 million year over year to a record $152 million, with higher volumes contributing $16 million and productivity adding another $10 million to the result.
Net income totaled $101 million, up from $87 million a year earlier, while net income margin increased to 10.3% from 9.5%, driven primarily by higher gross profit and lower interest expense.
Adjusted free cash flow edged up to $122 million from $121 million, representing 80% conversion from adjusted EBIT, with Garrett ending the quarter holding $788 million of total liquidity.
The company repurchased $28 million of common stock during the quarter, bringing year-to-date buybacks to $115 million, while also paying $15 million in dividends during the period.
GTX voluntarily repaid $50 million of term-loan debt during the quarter, reducing total debt principal to $1.39 billion from $1.44 billion at the end of 2025.
On the technology front, Garrett secured multiple turbocharger awards, including a large North American light vehicle program and a major Garrett MEG award for data-center gensets across multiple regions.
The company also began pre-development work on a commercial vehicle electric powertrain with a Japanese truck manufacturer, signaling a broader push into electrified drivetrain solutions.
For the full year, Garrett raised its net sales outlook to $3.7 to $3.9 billion and lifted its adjusted EBIT guidance range to $560 million to $600 million, up from the prior range of $520 million to $600 million.
Adjusted free cash flow guidance was also increased to a range of $385 million to $475 million, compared with the previous forecast of $355 million to $475 million.
Despite the post-earnings share price weakness, Garrett holds a Zacks Rank of 2 (Buy), an aggregate VGM Score of A, and a value grade of A, placing it in the top 20% for value-focused investors.
