Garrett Motion: From Auto Supplier to Industrial Tech
Data center partnerships, thermal management products, and hybrid adoption are mitigating the terminal value risk.
Article Type: Idea Update
Market Capitalization: $3.7b
Average Daily Trading Volume: 2.3m shares
Conviction: Unchanged
Disclaimer: I currently own shares of Garrett Motion. I may decide to purchase or sell shares at any time without prior notice. Do your own research and size positions appropriately if you invest. Nothing here is meant to be understood as investment or financial advice. AI tools assist my research and writing process, enhancing analytical efficiency and clarity. Investing bears risk, such as loss of principal.
TL;DR
Thesis Confirmed: FY2025 results reinforce the “Lindy” nature of the business. Despite a softer auto cycle, Garrett delivered robust margins and strong cash flow, proving its variable cost structure can weather macro volatility.
The “Ice Cube” is Freezing, Not Melting: Management’s 10-K risk disclosure updates signal a strategic shift toward “longer for longer” hybrid and REEV adoption. Combined with new industrial wins in data center gensets, these developments weaken the terminal decline bear thesis. Garrett’s expansion into hybrids, industrial applications, and thermal management increases the probability that the company will generate meaningful cash flow beyond the traditional internal combustion engine transition period. However, the durability and scale of these new revenue streams remain to be proven.
Capital Allocation Engine: The company continues to aggressively cannibalize its own float. With a new $250M buyback authorization and a rapidly clearing overhang from distressed debt holders, the setup for the equity is cleaning up just as the fundamental floor rises.
Valuation: Rather than pricing Garrett for imminent distress, the current valuation appears to reflect market expectations of gradual long-term earnings decline. This distinction is important: the investment case does not require Garrett to grow rapidly, but rather to demonstrate that its earnings can remain stable for longer than currently assumed.
Introduction
Since I started coverage of Garrett Motion ($GTX) in 2024, the shares had nearly tripled. But following last week’s FY2025 earnings report, shares pulled back 11% from the highs. Given the nice run and the pullback, the full-year financials are a good opportunity to take stock and re-underwrite the valuation.
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