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Meritor's (MTOR) Siemens Unit Buyout to Boost Electric Solutions

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Meritor, Inc. MTOR recently announced that it has entered into an agreement with Siemens to take over its Commercial Vehicles business for nearly €190 million. The transaction will be in cash, adjusted for changes in working capital at closing and is expected to close by the calendar year-end, subject to regulatory approvals.

The buyout will enhance Meritor’s offerings of superior electric solutions to the global commercial vehicle market by leveraging Siemens Commercial Vehicles business’ capabilities and technology. The rising demand for zero-carbon solutions calls for an opportunity to strengthen Meritor's electric solutions business.

Siemens’ offerings include direct-drive and transmission-based remote mount electric motors, inverters, software and related services, which will enable Meritor to offer a wider range of electrified product solutions across the commercial vehicle, transit, off-highway and specialty markets. These will also bolster its electronic portfolio.

Per the previously announced merger agreement under which Cummins agreed to acquire Meritor, the former has consented to and is supportive of the latter completing the Siemens Commercial Vehicles business buyout.

Meritor looks well-positioned to capture shares in the increasingly electrified future. It forecasts electrification to bring $1.5 billion in revenues by the decade-end.  Contracts with Thomas Built Buses, Volkswagen, Lion Electric, Hyliion, PACCAR, Volta Trucks, Hexagon Purus and Autocar, among others, for the supply of electric powertrain are expected to bolster electrification revenues and boost opportunities.

The buyout of AxleTech has fortified Meritor’s project range and diversified exposure in adjacent end markets served. The combination of AxleTech’s offerings with Meritor’s on-highway leadership will boost the latter’s prospects. It is expected to help the auto equipment provider realize more than $15 million in annual cost synergies by fiscal 2022.

Shares of Meritor have gained 43.2% over the past year against its industry’s 50.7% decline.

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Zacks Rank & Key Picks

MTOR currently carries a Zacks Rank #4 (Sell).

Better-ranked players in the auto space include BRP Group, Inc. DOOO, Genuine Parts Company GPC and Standard Motor Products SMP, each carrying a Zacks Rank #2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BRP Group has an expected earnings growth rate of 9.2% for fiscal 2023. The Zacks Consensus Estimate for current-year earnings has been revised around 7.2% upward in the past 60 days.

BRP Group’s earnings beat the Zacks Consensus Estimate in all of the trailing four quarters. DOOO pulled off a trailing four-quarter earnings surprise of 68%, on average. The stock has declined 15.2% over the past year.

Genuine Parts has an expected earnings growth rate of 13% for the current year. The Zacks Consensus Estimate for current-year earnings has been marginally revised 2.5% upwards in the past 60 days.

Genuine Parts’ earnings beat the Zacks Consensus Estimate in all of the trailing four quarters. GPC pulled off a trailing four-quarter earnings surprise of 11.34%, on average. The stock has lost 2.2% over the past year.

Standard Motor has an expected earnings growth rate of 1.4% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised around 2% upward in the past 60 days.

Standard Motor’s earnings beat the Zacks Consensus Estimate in all of the trailing four quarters. SMP pulled off a trailing four-quarter earnings surprise of 40.34%, on average. The stock has lost 15% over the past year.


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