Advertisement
Singapore markets open in 7 hours 33 minutes

  • Straits Times Index

    3,287.75
    -5.38 (-0.16%)
     

  • S&P 500

    5,028.33
    -43.30 (-0.85%)
     

  • Dow

    37,990.91
    -470.01 (-1.22%)
     

  • Nasdaq

    15,526.35
    -186.40 (-1.19%)
     

  • Bitcoin USD

    64,432.80
    -478.38 (-0.74%)
     

  • CMC Crypto 200

    1,397.37
    +14.80 (+1.07%)
     

  • FTSE 100

    8,078.86
    +38.48 (+0.48%)
     

  • Gold

    2,341.70
    +3.30 (+0.14%)
     

  • Crude Oil

    82.58
    -0.23 (-0.28%)
     

  • 10-Yr Bond

    4.6980
    +0.0460 (+0.99%)
     

  • Nikkei

    37,628.48
    -831.60 (-2.16%)
     

  • Hang Seng

    17,284.54
    +83.27 (+0.48%)
     

  • FTSE Bursa Malaysia

    1,569.25
    -2.23 (-0.14%)
     

  • Jakarta Composite Index

    7,155.29
    -19.24 (-0.27%)
     

  • PSE Index

    6,574.88
    +2.13 (+0.03%)
     

Why Is Meritor (MTOR) Down 0.6% Since Last Earnings Report?

Zacks Equity Research
·3-min read

It has been about a month since the last earnings report for Meritor (MTOR). Shares have lost about 0.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Meritor due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Meritor Q2 Earnings Top, Down Y/Y

Meritor recorded adjusted earnings of 74 cents per share in second-quarter fiscal 2020 (ended Mar 31, 2020), surpassing the Zacks Consensus Estimate of 54 cents. The outperformance resulted from higher-than-anticipated EBITDA (earnings before interest, tax, depreciation and amortization) from the Aftermarket & Industrial segment. Precisely, EBITDA from the segment came in at $49 million, topping the consensus mark of $44.6 million.

ADVERTISEMENT

The bottom line declined from the year-ago adjusted earnings of $1.03 a share. Adjusted income from continuing operations was $56 million compared with $88 million in second-quarter fiscal 2019.

Sales declined 24.6% year over year to $871 million and missed the Zacks Consensus Estimate of $890 million. The year-over-year decline was due to lower production volumes, partly offset by sales from Axle Tech, which was acquired by Meritor in fourth-quarter fiscal 2019.

Its adjusted EBITDA dropped to $107 million from $139 million in the year-ago quarter. Adjusted EBITDA margin was 12.3% compared with 12% a year ago.

Segment Results

Revenues at the Commercial Truck & Trailer segment amounted to $588 million in second-quarter fiscal 2020, down 33% from the year-ago level due to lower production volumes across most markets served amid the coronavirus crisis. The segment’s adjusted EBITDA fell to $55 million from $88 million in the year-ago quarter. EBITDA margin declined to 9.4% from 10% in the prior-year quarter.

Revenues at the Aftermarket & Industrial segment totaled $319 million, down 3% from the year-ago level, primarily due to lower production volumes across most markets served partly offset by revenues generated from the AxleTech acquisition. The segment’s adjusted EBITDA was $49 million, compared with $52 million in the year-ago quarter. EBITDA margin declined to 15.4% from 15.8% in the prior-year quarter.

Financial Position

In the reported quarter, Meritor’s cash and cash equivalents totaled $508 million as of Mar 31, 2020, compared with $108 million as of Sep 30, 2019. Long-term debt was $1,203 million at the end of second-quarter fiscal 2020, depicting a rise from $902 million as of Sep 30, 2019.

Meritor suspended its existing share-repurchase program until further notice on the heightening coronavirus scare.

2020 Outlook

Meritor scrapped the fiscal 2020 guidance as it expects that the pandemic’s impact to strain the company’s operations in the days to come.

For third-quarter fiscal 2020, Meritor now projects sales in the band of $400-$500 million. Cash flow from operations is anticipated in the range of negative $150 million to negative $225 million.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -167.62% due to these changes.

VGM Scores

Currently, Meritor has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Meritor has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Meritor, Inc. (MTOR) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.