High profitability and the expansion of the industrial segment strengthen Garrett Motion’s (NASDAQ: GTX) investment appeal, according to Freedom Broker analysts Kanagat Yertai and Dmitry Pozdnyakov. The experts upgraded the stock from “Hold” to “Buy,” while simultaneously lowering the target price from $34 to $31 due to revised earnings forecasts and valuation parameters.
Garrett Motion manufactures turbochargers and other components for automobiles and industrial equipment. The company also develops electric compressors and energy-efficiency solutions. The new target price implies upside potential of about 37.9% versus $22.48 cited in Freedom’s report.
Profitability offset the revenue shortfall versus the forecast
Garrett’s revenue for Q3 2026 rose 3% year over year to $930 million. At the same time, it came in 0.9% below Freedom’s forecast of $938 million.
Adjusted operating profit, by contrast, exceeded the analysts’ estimate by 5.6% and reached $152 million. Margin on this metric increased by 1.6 percentage points to 16.3%. Gross profit rose 11% to $206 million.
Net income totaled $97 million versus $77 million a year earlier. The company disclosed the figures in its quarterly report.
According to Freedom’s calculations, earnings per share reached $0.51 versus the expected $0.43. The result was supported by a more favorable sales mix, productivity gains, and a relatively low effective tax rate.
The industrial business is becoming more prominent
Revenue from the commercial transportation and industrial equipment segment grew 23% in constant currency. This helped offset a decline in sales of components for gasoline-powered vehicles, primarily due to weaker demand in China.
Management raised its 2026 revenue outlook for the industrial business from $200 million to approximately $230 million. In 2027, the company expects to generate about $300 million—roughly 30% more.
The main contribution comes from turbochargers for power-generation and other industrial equipment. Freedom estimates that the necessary production capacity is already in place, allowing sales to increase without significant additional investment in expansion.
At the same time, new electric solutions will deliver a more noticeable effect gradually. For example, electric compressors for cooling systems are not yet expected to become a major source of revenue in 2027.
Cash flow remains resilient
Adjusted free cash flow totaled $136 million versus Freedom’s forecast of $117 million. Operating cash flow net of capital expenditures was lower—about $120 million. The analysts note the impact of adjustments and the timing of tax refunds, so they will continue to monitor the quality of cash receipts.
Garrett also approved a share buyback program of up to $250 million for 2027 and a quarterly dividend of $0.08 per share. In October, the company repaid $50 million of debt ahead of schedule.
Why the target was lowered while the rating was upgraded
Management confirmed the midpoint of its annual guidance ranges. Freedom, however, slightly reduced its own expectations: the 2026 adjusted operating profit forecast is $580 million, and the 2027 earnings-per-share forecast is $2.20.
The analysts maintain a positive view due to industrial-segment growth, profitability, and cash flows. The lower $31 target price still implies significant upside versus the share price used in the report, consistent with a “Buy” rating.
Previously, Freedom highlighted Garrett among small-cap companies, noting resilient demand for turbochargers and opportunities to diversify the business. The new results show a growing contribution from industrial customers, although uncertainty in the automotive industry persists.
This is not an individual investment recommendation.