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Meritor (MTOR) Earnings Surpass Estimates in Q1, Rise Y/Y

Zacks Equity Research

Shares of Meritor, Inc. MTOR have gained 9.9% in a day’s trading, following the first-quarter fiscal 2019 (ended Dec 31, 2018) earnings release. During the reported quarter, the company recorded adjusted earnings of 79 cents per share compared with 62 cents a year ago. The figure surpassed the Zacks Consensus Estimate of 60 cents.

Adjusted income from continuing operations was $69 million compared with $55 million in first-quarter fiscal 2018.

Sales increased approximately 15% year over year to $1.04 billion. The top line also beat the Zacks Consensus Estimate of $967.8 million. This rise was due to improved market share and increased truck production, primarily in North America.

Meritor, Inc. Price, Consensus and EPS Surprise

 

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

Meritor’s adjusted EBITDA (earnings before interest, tax, depreciation and amortization) increased to $119 million compared with $99 million a year ago. Adjusted EBITDA margin was 11.5% compared with 11% a year ago. Gain in adjusted EBITDA and adjusted EBITDA margin were due to higher revenues, and increased earnings from unconsolidated affiliates.

Segment Results

Revenues from the Commercial Truck & Trailer segment increased to $824 million, up 16% from the same period of the last fiscal year. The segment’s adjusted EBITDA increased to $79 million, up $10 million from the year-ago quarter. EBITDA margin declined to 9.6% from 9.7% in the same period of the last fiscal year.

Revenues from the Aftermarket & Industrial segment were $257 million, up 12% from the year-ago quarter. This gain was primarily due to increased aftermarket volume across North America and higher sales in the Industrial business. The segment’s adjusted EBITDA was $38 million, up $6 million from the same time frame a year ago. EBITDA margin moved up to 14.8% from 14% in the preceding fiscal year.

Financial Position

For the reported quarter, Meritor’s cash and cash equivalents totaled $127 million as of Dec 31, 2018, compared with $116 million as of Dec 31, 2017. Long-term debt was $731 million at the end of first-quarter fiscal 2019 from $730 million at the end of fiscal 2018.

Meritor’s cash inflow from operating activities was $11 million compared with $33 million in the year-ago quarter. During the quarter under review, capital expenditure was $23 million compared with $18 million a year ago.

Share Repurchase

During the reported quarter, the company repurchased 3 million common shares for $50 million.

Outlook

In fiscal 2019, Meritor expects sales of approximately $4.3 billion. Net income is anticipated to be approximately $265 million and adjusted EBITDA is projected to be $495 million. Adjusted earnings per share from continuing operations are projected to be $3.30.

Zacks Rank & Stocks to Consider

Meritor currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader auto sector are Dana Incorporated DAN, General Motors Company GM and Genuine Parts Company GPC, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Dana has an expected long-term growth rate of 2.9%. Share price of the company has increased 28.9% in the past month.

General Motors has an expected long-term growth rate of 8.5%. Over the past month, shares of the company have gained 15%.

Genuine Parts has an expected long-term growth rate of 5%. Shares of the company have gained 2.4% in the past month.

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