Meritor (MTOR) Q4 Earnings & Revenues Beat Estimates, Up Y/Y

Meritor, Inc. (NYSE:MTOR) recorded a year-over-year increase of 82.3% in adjusted earnings of 62 cents per share in the fiscal fourth quarter of 2017 (ended Sep 30, 2017), comfortably surpassing the Zacks Consensus Estimate of 47 cents.

Adjusted income from continuing operations was $56 million compared with $30 million in the fiscal fourth quarter of 2016.

Revenues increased 26.7% year over year to $922 million. The top line also surpassed the Zacks Consensus Estimate of $837 million.

Meritor, Inc. Price, Consensus and EPS Surprise

Meritor’s adjusted EBITDA (earnings before interest, tax, depreciation and amortization) increased to $98 million from $74 million a year ago. Adjusted EBITDA margin was 10.6% compared with 10.2% in the comparable quarter, last year. Both adjusted EBITDA and EBITDA margin increased on a year-over-year basis, driven by high revenue growth.

Fiscal 2017 Results

Meritor reported a 15% rise in adjusted earnings of $1.88 per share for fiscal 2017 ahead of the Zacks Consensus Estimate of $1.72.

Annual revenues increased 5% year over year to $3.35 billion, surpassing the Zacks Consensus Estimate of $3.22 billion.

Segment Results

Revenues from the Commercial Truck & Industrial segment shot up to $728 million, up $187 million from the same period, last year. This upside was primarily driven by higher production across all regions and new business wins. Segment adjusted EBITDA jumped to $73 million, up $34 million from the year-ago quarter. EBITDA margin rose to 10% in comparison to 7.2% in the prior-year quarter.

Revenues from the Aftermarket & Trailer segment were $226 million, up $14 million from the year-ago quarter, primarily on higher aftermarket volumes in North America and Europe. Segment EBITDA was $28 million compared with $29 million from the same time frame, a year ago. EBITDA margin decreased to 12.4%, down 1.3% from the preceding year. This reduction in Segment EBITDA and EBITDA margin was due to high asbestos expenses.

Financial Position

Meritor’s cash and cash equivalents totaled $88 million as of Sep 30, 2017 compared with $160 million as of Sep 30, 2016. Long-term debt climbed to $750 million as of Sep 30, 2017 from $14 million as of Sep 30, 2016.

At the fiscal year-end, Meritor’s cash flow from operating activities fell to $176 million in comparison to $204 million, recorded in the previous year. Capital expenditures increased to $95 million from the year-ago figure of $93 million.

Outlook

For fiscal 2018, Meritor expects revenues to be approximately $3.6 billion. Adjusted earnings from continuing operations are anticipated to be in the range of $2.2-$2.4 per share. Adjusted EBITDA margin is expected to be within the range of 10.8-11% compared with 10.4% in fiscal 2017.

Further, the company anticipates its free cash flow estimates for fiscal 2018 within the range of $90-$100 million in comparison to $81 million in fiscal 2017. Similarly, operating cash flow is expected in the band of $190-$200 million.

Zacks Rank & Other Stocks to Consider

Meritor sports a Zacks Rank #1 (Strong Buy). A few other top-ranked companies in the auto space are Navistar International Corporation (NYSE:NAV) , American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) and AB Volvo (OTC:VLVLY) , all flaunting the same bullish Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Navistar has an expected long-term growth rate of 5%. Its shares are up 49.7% in the last six months.

American Axle has an expected long-term growth rate of 8.1%. Shares of the company are up 23.3% in the last three months.

Volvo has an expected long-term growth rate of 15%. Its shares are up 13.2% in the last three months.

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