Advertisement
Singapore markets close in 28 minutes
  • Straits Times Index

    3,233.26
    -18.45 (-0.57%)
     
  • Nikkei

    40,168.07
    -594.66 (-1.46%)
     
  • Hang Seng

    16,541.42
    +148.58 (+0.91%)
     
  • FTSE 100

    7,950.79
    +18.81 (+0.24%)
     
  • Bitcoin USD

    70,490.79
    +627.15 (+0.90%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • S&P 500

    5,248.49
    +44.91 (+0.86%)
     
  • Dow

    39,760.08
    +477.75 (+1.22%)
     
  • Nasdaq

    16,399.52
    +83.82 (+0.51%)
     
  • Gold

    2,213.50
    +0.80 (+0.04%)
     
  • Crude Oil

    81.79
    +0.44 (+0.54%)
     
  • 10-Yr Bond

    4.1960
    0.0000 (0.00%)
     
  • FTSE Bursa Malaysia

    1,530.60
    -7.82 (-0.51%)
     
  • Jakarta Composite Index

    7,267.38
    -42.71 (-0.58%)
     
  • PSE Index

    6,903.53
    +5.36 (+0.08%)
     

Why Is Meritor (MTOR) Down 5.6% Since the Last Earnings Report?

It has been more than a month since the last earnings report for Meritor, Inc. MTOR. Shares have lost about 5.6% in that time frame, underperforming the market.

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

Meritor Q4 Earnings & Revenues Beat Estimates, Up Y/Y

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

ADVERTISEMENT

Adjusted income from continuing operations was $56 million compared with $30 million in the 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’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 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.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.

Meritor, Inc. Price and Consensus

 

Meritor, Inc. Price and Consensus | Meritor, Inc. Quote

 

VGM Scores

At this time, the stock has a nice Growth Score of B, however its Momentum is doing a bit better with an A. Following the exact same course, the stock was allocated also 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.

Based on our scores, the stock is equally suitable for value and momentum investors while growth investors may want to look elsewhere.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline 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.
 
Zacks Investment Research