Meritor (MTOR) Q3 Earnings Surpass Estimates, Improve Y/Y

Meritor, Inc. (NYSE:MTOR) recorded adjusted earnings of $1.20 per share in third-quarter fiscal 2019 (ended Jun 30, 2019), which surpassed the Zacks Consensus Estimate of 95 cents. In the year-ago quarter, the bottom line was 89 cents per share.

Adjusted income from continuing operations was $103 million compared with $80 million in third-quarter fiscal 2018.

Sales increased approximately 3% year over year to $1.17 billion. The top line missed the Zacks Consensus Estimate by 0.34%. The year-over-year rise was driven by higher truck production, particularly in North America. However, it was partially offset by the strengthening of the U.S. dollar against most currencies.

Meritor’s adjusted EBITDA (earnings before interest, tax, depreciation and amortization) increased to $146 million from $135 million in the year-ago quarter. Adjusted EBITDA margin was 12.5% compared with 12% a year ago. Gain in adjusted EBITDA was driven by higher revenues and the company’s aftermarket pricing actions, partly offset by high material costs.

Segment Results

Revenues in the Commercial Truck & Trailer segment amounted to $869 million, up 2% from the year-ago quarter’s level. The segment’s adjusted EBITDA fell to $93 million from $100 million recorded in the year-ago quarter. EBITDA margin declined to 10.7% from 11.7% in the prior-year quarter. The fall in EBIDTA and EBITDA margin was caused by high material costs.

Revenues in the Aftermarket & Industrial segment were $340 million, up 7% from the year-ago quarter’s level. The uptick can primarily be attributed to higher aftermarket volume across North America and sales in the industrial businesses. The segment’s adjusted EBITDA was $54 million compared with $38 million recorded in the year-ago quarter. EBITDA margin moved up to 15.9% from 11.9% in the third quarter of fiscal 2018.

Meritor, Inc. Price, Consensus and EPS Surprise

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

Financial Position

In the reported quarter, Meritor’s cash and cash equivalents totaled $111 million as of Jun 30, 2019 compared with $115 million as of Sep 30, 2018. Long-term debt was $734 million at the end of fiscal third quarter compared with $730 million at the end of fourth-quarter fiscal 2018.

Meritor’s cash inflow from operating activities was $143 million compared with $119 million in the year-ago quarter. During the quarter under review, capital expenditure was $19 million compared with $17 million in the year-ago quarter.

Outlook

In fiscal 2019, Meritor expects sales of approximately $4.4 billion. Net income is anticipated to be approximately $290 billion compared with the previous view of $265 million. Adjusted earnings per share from continuing operations are projected to be $3.70, up from $3.3 mentioned earlier.

Zacks Rank & Stocks to Consider

Currently, Meritor has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the auto space worth considering are Copart, Inc (NASDAQ:CPRT) , CarMax, Inc (NYSE:KMX) and Gentex Corporation (NASDAQ:GNTX) . While Copart sports a Zacks Rank #1 (Strong Buy), CarMax and Gentex carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Copart has an expected long-term growth rate of 20%. In the past year, shares of the company have rallied 34.7%.

CarMax has an expected long-term growth rate of 12.6%. In the past year, shares of the company have moved up 19.9%.

Gentex has an expected long-term growth rate of 5%. In the past year, shares of the company have returned 20.9%.

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