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Meritor (MTOR) Q2 Earnings Surpass Estimates, FY19 View Up

Zacks Equity Research

Meritor, Inc. MTOR recorded adjusted earnings of $1.03 per share in the second-quarter fiscal 2019 (ended Mar 31, 2019), which surpassed the Zacks Consensus Estimate of 87 cents. In the year-ago period, the figure was 75 cents per share.

Adjusted income from continuing operations was $88 million compared with $65 million in second-quarter fiscal 2018.

Sales increased approximately 8% year over year to $1.56 billion. The top line surpassed the Zacks Consensus Estimate of $1.1 billion. This year-over-year rise was due to higher truck production, majorly 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 $139 million from $122 million a year ago. Adjusted EBITDA margin was 12% compared with 11.4% a year ago. Gain in adjusted EBITDA was due to higher revenues, partly offset by foreign currency fluctuation.

Segment Results

Revenues from the Commercial Truck & Trailer segment increased to $876 million, up 7% from the same period of the year-ago quarter. The segment’s adjusted EBITDA decreased to $88 millionfrom $94 million recorded in the year-ago quarter. EBITDA margin declined to 10% from 11.5% in the same period of the last fiscal year.

Revenues from the Aftermarket & Industrial segment were $329 million, up 11% from the year-ago quarter. This gain was primarily due to increased aftermarket volume across North America, and higher sales in the industrial and trailer businesses. The segment’s adjusted EBITDA was $52 millioncompared to $38 million recorded in the year-ago period. EBITDA margin moved up to 12.8% from 15.8% in the prior-year quarter.

Financial Position

For the reported quarter, Meritor’s cash and cash equivalents totaled $98 million as of Mar 31, 2019, compared with $115 million as of Sep 30, 2018. Long-term debt was $738 million at the end of second-quarter fiscal 2019 compared with$730 million at the end of fourth-quarter fiscal 2018.

Meritor’s cash inflow from operating activities was $40 million compared with $39 million in the year-ago quarter. During the quarter under review, capital expenditure was $21 million compared with $17 million a year ago.

Outlook

In fiscal 2019, Meritor expects sales of approximately $4.4 billion compared with previously mentioned $4.3 billion. Net income is anticipated to be approximately $285 billion compared with$265 million stated earlier. Adjusted earnings per share from continuing operations are projected to be $3.50, rising from $3.30 mentioned earlier.

Zacks Rank & Stocks to Consider

Meritor currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the auto space are PACCAR, Inc. PCAR, Allison Transmission Holdings, Inc. ALSN and Ford Motor Company F, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

PACCAR has an expected long-term growth rate of 8.4%. The company’s stock has seen the Zacks Consensus Estimate for earnings in 2019 being revised 0.16% upward over the past 30 days.

Allison Transmission has an expected current-year growth rate of 10%. The company’s stock has seen the Zacks Consensus Estimate for earnings in 2019 being revised 2.4% upward over the past 30 days.

Ford has an expected long-term growth rate of 9.8%. The company’s stock has seen the Zacks Consensus Estimate for earnings in 2019 being revised 9.1% upward over the past 30 days.

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