Shares of Adient (ADNT) dropped sharply after the company said its chairman and CEO will step down immediately and slashed its profit outlook for fiscal 2018. CEO TO STEP DOWN IMMEDIATELY: Adient said chairman and CEO R. Bruce McDonald is stepping down, effective immediately, though he will remain as an advisor to the CEO until September 30. McDonald has served as the company's chairman and CEO since its separation from Johnson Controls (JCI) in 2016. The company said Frederick Henderson, who was most recently CEO of SunCoke Energy (SXC) and SunCoke (SXCP) and, prior to that, served as president and CEO of General Motors (GM), will become its interim CEO and current lead director John Barth will become Adiant's interim chairman. Henderson has served on the Adient board since the company was established as a public entity in 2016. REVISED GUIDANCE: Adient also said that its operating performance is "running behind plan," and revised its outlook for fiscal 2018. Despite an anticipated increase in revenue for the year to about $17.5B, Adient said its outlook for adjusted EBITDA is now expected to be about $1.25B. "Continued challenges impacting the Seat Structures & Mechanisms segment drove approximately half of the shortfall versus previous expectations while weakness in the company's Seating segment and Interiors drove the remainder," it said. As a result of the lower earnings, increased cash restructuring, and a negative working capital trend, Adient said free cash flow for the fiscal year is expected to be approximately flat to negative $100M. In a statement, Henderson said "While our market position remains strong and our China joint ventures continue to perform at high levels, we recognize that we are not executing at the levels we are capable of in our consolidated Seat Structures and Mechanisms and Seating segments, and that shortfall has been reflected in our financial results and valuation. My immediate focus is on better operational execution to drive meaningful improvements in profitability and free cash flow. We know what needs to be done and we will be approaching the work ahead of us with urgency." ANALYST COMMENTARY: Baird analyst David Leiker downgraded Adient to Underperform from Neutral and cut his price target to $50 from $66, telling investors in a research note that the guidance cut was not a surprise, but the CEO change was somewhat unexpected, adding that operational issues will require meaningful changes that will take longer than expected and push out a revenue/margin recovery into 2020. PRICE ACTION: Shares of Adient are down almost 17% in late morning trading to $47.49.
SunCoke Energy Partners initiated with a Buy at Seaport Global. Seaport Global analyst Mark Levin initiated SunCoke Energy Partners (SXCP) with a Buy and $21 price target. Levin expects sponsor SunCoke Energy (SXC) to continue accumulating its units said the company has unique cash flow stability and predictability.