Garrett Motion Q3 2026 Adjusted EBIT Rises as Industrial Growth Offsets Light-Vehicle Weakness

Garrett Motion Inc. (NASDAQ: GTX) reported higher third-quarter 2026 sales and earnings as growth in commercial vehicle, industrial and aftermarket operations offset softer light-vehicle demand. The company maintained the midpoint of its full-year outlook, saying stronger operating performance and favorable product mix were balancing foreign-exchange pressure.

Net sales rose 3% year over year to $930 million, both on a reported and constant-currency basis. GAAP net income increased to $97 million from $77 million, while income before taxes climbed to $119 million from $102 million.

Adjusted EBIT increased by $19 million to $152 million. The adjusted EBIT margin expanded 160 basis points to 16.3%, despite 70 basis points of dilution from unfavorable currency movements. Garrett attributed the improvement primarily to a richer mix of commercial vehicle, industrial and aftermarket sales, along with productivity and other operating gains, partly offset by lower light-vehicle volumes and higher research, development and engineering spending.

Commercial Vehicle and Industrial Sales Lead Growth

Commercial vehicle sales advanced 23% at constant currency and represented 22% of quarterly revenue. Aftermarket sales, accounting for 13% of the total, rose 6% at constant currency, supported by demand for off-highway and industrial replacement parts.

Diesel sales increased 6% at constant currency, reflecting stronger demand for light-commercial-vehicle diesel applications in Europe. Gasoline sales declined 5%, with the company citing softness in China. Overall, Garrett said it outperformed light-vehicle industry production during the quarter.

The company also reported continued expansion in industrial applications. Sales from existing industrial programs are expected to reach about $230 million in 2026 and approximately $300 million in 2027, exceeding its previous expectations. Garrett is building its presence in data-center power generation and industrial cooling, including an E-Cooling compressor award from Multistack for applications such as computer-room air conditioning, with launches planned for 2027.

Other technology developments included the launch of a high-volume E-Turbo program with Mercedes, multiple commercial vehicle awards across regions and several light-vehicle turbo wins for domestic and export programs in China. Garrett said E-Cooling field tests remain on schedule, while an E-Powertrain program for heavy-duty vehicles in China is on track for a 2027 launch.

Cash Generation Supports Debt Reduction and Shareholder Returns

Adjusted free cash flow rose to $136 million from $107 million a year earlier, representing 89% conversion from adjusted EBIT. Net cash provided by operating activities was $135 million, compared with $100 million in the prior-year quarter. The company said working capital, capital expenditures, cash interest and depreciation were in line with its expectations, while low cash taxes reflected the timing of tax refunds.

Garrett ended September with $841 million of liquidity, including $211 million of unrestricted cash and $630 million available under its revolving credit facility. Net debt declined to $1.17 billion from $1.23 billion at the end of the second quarter, and the net consolidated leverage ratio improved to 1.66 times. The company repaid $50 million of term-loan debt on October 21, bringing year-to-date repayments to $100 million.

The company repurchased $57 million of common stock during the quarter and $172 million through the first nine months of 2026. It had $78 million remaining under its 2026 authorization and approved a new $250 million repurchase authorization for 2027. Garrett also declared a fourth-quarter dividend of $0.08 per share and said it is targeting the return of about 75% of adjusted free cash flow to shareholders over time, although the timing and amount will depend on macroeconomic and industry conditions.

Full-Year Midpoint Maintained Despite Currency Pressure

Garrett retained a 2026 adjusted EBIT midpoint of $580 million and an adjusted EBIT margin midpoint of 15.3%. Its current adjusted EBIT range is $570 million to $590 million, compared with the prior range of $560 million to $600 million. The company said improved operating performance and a more favorable sales mix were offsetting an estimated $10 million foreign-exchange headwind relative to its previous outlook.

The full-year net sales range was narrowed to $3.75 billion to $3.85 billion from $3.7 billion to $3.9 billion, leaving the midpoint unchanged. Garrett expects constant-currency sales growth of 2% to 6%, GAAP net income of $337 million to $352 million, operating cash flow of $460 million to $500 million and adjusted free cash flow of $410 million to $450 million.

The outlook assumes a 2% to 4% decline in light-vehicle industry production, battery-electric-vehicle penetration of about 19%, and 1% to 2% growth in the commercial vehicle industry. Garrett also expects research and development spending of about 4.2% of sales and capital expenditures of roughly 2.4%.

Key uncertainties identified in the presentation include evolving automotive demand, unfavorable currency movements, tariff and inflation effects, competitive conditions, and broader macroeconomic and geopolitical risks. The company said it continues to pass through tariff and inflation costs, including through customer recoveries, while executing fixed and variable cost-productivity measures.