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Meritor (MTOR) Beats on Q1 Earnings & Sales, Raises FY21 View

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Meritor, Inc. MTOR posted adjusted earnings per share of 60 cents in first-quarter fiscal 2021 (ended Dec 31, 2020), marginally surpassing the Zacks Consensus Estimate of 59 cents. Higher-than-anticipated adjusted EBITDA from the Commercial Truck & Trailer and Aftermarket & Industrial segments resulted in this outperformance.

The bottom line, however, declined marginally from the year-ago adjusted earnings of 64 cents a share. Adjusted income from continuing operations was $44 million in the reported quarter compared with the $52 million recorded in the prior-year period.

Sales edged down 1.3% year over year to $889 million in the fiscal first quarter. This year-over-year decline primarily resulted from the unfavorable impact of the termination of the WABCO distribution arrangement, which took place in second-quarter fiscal 2020, largely offset by higher truck production. Nonetheless, the reported figure surpassed the Zacks Consensus Estimate of $815 million.

Adjusted EBITDA went up to $102 million from the year-earlier quarter’s $98 million. Adjusted EBITDA margin was 11.5% compared with the prior year’s 10.9%.

Meritor, Inc. Price, Consensus and EPS Surprise

Meritor, Inc. Price, Consensus and EPS Surprise
Meritor, Inc. Price, Consensus and EPS Surprise

Meritor, Inc. price-consensus-eps-surprise-chart | Meritor, Inc. Quote

Segment Results

For the December-end quarter, revenues in the Commercial Truck & Trailer segment amounted to $691 million, up 4% year over year on slightly higher market volumes in Europe and India. Moreover, the figure outpaced the Zacks Consensus Estimate of $607 million. The segment reported adjusted EBITDA of $63 million, up from the $57 million witnessed in the year-ago quarter. The figure also handily surpassed the consensus mark of $42.81 million. EBITDA margin expanded to 9.1% during the quarter from the 8.6% recorded in the prior-year quarter.

Quarterly revenues in the Aftermarket & Industrial segment totaled $234 million, dropping 15% from the year-ago level, on account of the termination of the WABCO distribution arrangement. The revenue figure, nonetheless, beat the Zacks Consensus Estimate of $226 million. The segment’s adjusted EBITDA was $35 million, down $4 million from the prior-year period. Nevertheless, EBITDA margin inched up 0.8% year on year to 15% during the October-December period.

Financial Position

In the reported quarter, Meritor’s cash and cash equivalents summed $283 million as of Dec 31, 2020, compared with $108 million as of Dec 31, 2019. Long-term debt was $1,189 million at the end of the fiscal first quarter, up from the $901 million as of Dec 31, 2019.

Meritor’s cash flow from operating activities as of Dec 31, 2020, was $44 million, compared with the cash used for operating activities of $19 million witnessed in the year-ago quarter. Free cash flow for the fiscal first quarter was $34 million compared with the negative $35 million recorded in the same period last year. For the quarter ended Dec 31, 2020, capital expenditure was $10 million compared with the $16 million incurred in the year-ago quarter.

Upbeat Fiscal 2021 Outlook

For fiscal 2021, Meritor projects sales in the range of $3.65-$3.8 billion, up from the previous guidance of $3.1-$3.35 billion. Cash flow from operations and free cash flow are anticipated in the band of $205-$220 million and $110-$125 million, respectively, up from the guidance of $145-$185 million and $60-$100 million, respectively, issued in the last quarter.

Further, the firm projects net income from continuing operations at $115-$140 million, significantly higher than the previous estimate of $45-$75 million.

Zacks Rank & Other Key Picks

Meritor currently carries a Zacks Rank of 2 (Buy). Shares of the company have appreciated 28.2% in the past year compared with the industry’s rally of 18.9%.

Other top-ranked stocks in the same sector are Adient Plc ADNT, American Axle & Manufacturing Holdings AXL and Magna International MGA, all of which currently flaunt a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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