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Share price of Meritor, Inc. increased 2.96% to $9.73 on Aug 4 after the company reported adjusted income of 57 cents per share for the third quarter (ended Jun 30, 2016) of fiscal 2016 that surpassed the Zacks Consensus Estimate of 44 cents. Earnings also increased from 42 cents recorded a year ago. Adjusted net income improved to $52 million from $42 million in the third quarter of fiscal 2015.
On a reported basis, Meritor posted net income of $41 million or 45 cents per share in the third quarter of fiscal 2016, compared to $42 million or 46 cents per share in the prior-year quarter.
Revenues fell 7% year over year to $841 million and missed the Zacks Consensus Estimate of $842 million. The year-over-year decline is attributable to lower truck production in the North America Class 8 truck market, partially offset by new business gains.
Meritor’s adjusted EBITDA increased to $96 million from $87 million recorded in the year-ago quarter. Adjusted EBITDA margin was 11.4%, compared with 9.6% in the year-ago quarter. The rise in adjusted EBITDA stemmed from lower material, labor and burden costs and supplier recovery and an insurance settlement in the reported quarter, partially offset by lower sales in North America.
Revenues from the Commercial Truck & Industrial segment went down 9% to $640 million in the reported quarter. The decline was owing to lower truck production in the North America Class 8 truck market, partially offset by new business gains.
Segment EBITDA was $61 million compared with $58 million in the year-ago quarter. EBITDA margin increased to 9.5% from 8.2% in the prior-year quarter. The margin improvement was backed by lower material, labor and burden costs.
Revenues from the Aftermarket & Trailer segment went up 2.6% to $227 million on the back of lower sales in North America Aftermarket. Segment EBITDA increased to $38 million from $31 million in the year-ago quarter. EBITDA margin was 16.7% compared with 13.3% in the third quarter of fiscal 2015.
Financial Position
Meritor’s cash and cash equivalents totaled $129 million as of Jun 30, 2016, versus $193 million as of Sep 30, 2015. Total debt amounted to $994 million as of Jun 30, 2016, compared with $1.05 billion as of Sep 30, 2015.
In the first nine months of fiscal 2016, Meritor’s cash flow from operating activities was $144 million compared with $122 million in the prior-year period. Capital expenditures increased to $66 million from $45 million a year ago. Free cash flow was $78 million compared with $77 million in the year-ago quarter.
Share Repurchases
In the reported quarter, Meritor repurchased 4.7 million shares for $38 million. Thus, the company has repurchased 12.8 million shares so far, under its $210 million repurchase program. In addition, it bought back a total of $74 million in convertible debt during the program, which helped to lower interest expense, improve debt maturity profile and mitigate long-term equity dilution risk.
On Jul 21, 2016, Meritor's board of directors authorized the repurchase of up to $150 million worth of public debt securities and up to $100 million worth of shares through Sep 30, 2019.
Outlook
For fiscal 2016, Meritor expects revenues to be $3.225 billion, down from the previous expectation of $3.275 billion. Adjusted EBITDA margin is likely to be 10%. Adjusted earnings from continuing operations are expected to be $1.60 per share compared to the prior estimate of $1.55–$1.65.
Further, the company expects free cash flow of $90 million and operating cash flow of $180 million.
Meanwhile, Meritor is focused on its three-year plan, M2016, which aims at achieving margin, debt reduction and revenue growth through operational efficiency, enhancement of customer value and reduction of product costs.
Zacks Rank
Meritor currently carries a Zacks Rank #3 (Hold).
Some better-ranked automobile stocks include The Goodyear Tire & Rubber Company (GT - Free Report) , Johnson Controls Inc. (JCI - Free Report) and Gentex Corp. (GNTX - Free Report) , each carrying a Zacks Rank #2 (Buy).
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Meritor's (MTOR) Q3 Earnings Beat Estimates, Improve Y/Y
Share price of Meritor, Inc. increased 2.96% to $9.73 on Aug 4 after the company reported adjusted income of 57 cents per share for the third quarter (ended Jun 30, 2016) of fiscal 2016 that surpassed the Zacks Consensus Estimate of 44 cents. Earnings also increased from 42 cents recorded a year ago. Adjusted net income improved to $52 million from $42 million in the third quarter of fiscal 2015.
On a reported basis, Meritor posted net income of $41 million or 45 cents per share in the third quarter of fiscal 2016, compared to $42 million or 46 cents per share in the prior-year quarter.
Revenues fell 7% year over year to $841 million and missed the Zacks Consensus Estimate of $842 million. The year-over-year decline is attributable to lower truck production in the North America Class 8 truck market, partially offset by new business gains.
Meritor’s adjusted EBITDA increased to $96 million from $87 million recorded in the year-ago quarter. Adjusted EBITDA margin was 11.4%, compared with 9.6% in the year-ago quarter. The rise in adjusted EBITDA stemmed from lower material, labor and burden costs and supplier recovery and an insurance settlement in the reported quarter, partially offset by lower sales in North America.
MERITOR INC Price, Consensus and EPS Surprise
MERITOR INC Price, Consensus and EPS Surprise | MERITOR INC Quote
Segment Results
Revenues from the Commercial Truck & Industrial segment went down 9% to $640 million in the reported quarter. The decline was owing to lower truck production in the North America Class 8 truck market, partially offset by new business gains.
Segment EBITDA was $61 million compared with $58 million in the year-ago quarter. EBITDA margin increased to 9.5% from 8.2% in the prior-year quarter. The margin improvement was backed by lower material, labor and burden costs.
Revenues from the Aftermarket & Trailer segment went up 2.6% to $227 million on the back of lower sales in North America Aftermarket. Segment EBITDA increased to $38 million from $31 million in the year-ago quarter. EBITDA margin was 16.7% compared with 13.3% in the third quarter of fiscal 2015.
Financial Position
Meritor’s cash and cash equivalents totaled $129 million as of Jun 30, 2016, versus $193 million as of Sep 30, 2015. Total debt amounted to $994 million as of Jun 30, 2016, compared with $1.05 billion as of Sep 30, 2015.
In the first nine months of fiscal 2016, Meritor’s cash flow from operating activities was $144 million compared with $122 million in the prior-year period. Capital expenditures increased to $66 million from $45 million a year ago. Free cash flow was $78 million compared with $77 million in the year-ago quarter.
Share Repurchases
In the reported quarter, Meritor repurchased 4.7 million shares for $38 million. Thus, the company has repurchased 12.8 million shares so far, under its $210 million repurchase program. In addition, it bought back a total of $74 million in convertible debt during the program, which helped to lower interest expense, improve debt maturity profile and mitigate long-term equity dilution risk.
On Jul 21, 2016, Meritor's board of directors authorized the repurchase of up to $150 million worth of public debt securities and up to $100 million worth of shares through Sep 30, 2019.
Outlook
For fiscal 2016, Meritor expects revenues to be $3.225 billion, down from the previous expectation of $3.275 billion. Adjusted EBITDA margin is likely to be 10%. Adjusted earnings from continuing operations are expected to be $1.60 per share compared to the prior estimate of $1.55–$1.65.
Further, the company expects free cash flow of $90 million and operating cash flow of $180 million.
Meanwhile, Meritor is focused on its three-year plan, M2016, which aims at achieving margin, debt reduction and revenue growth through operational efficiency, enhancement of customer value and reduction of product costs.
Zacks Rank
Meritor currently carries a Zacks Rank #3 (Hold).
Some better-ranked automobile stocks include The Goodyear Tire & Rubber Company (GT - Free Report) , Johnson Controls Inc. (JCI - Free Report) and Gentex Corp. (GNTX - Free Report) , each carrying a Zacks Rank #2 (Buy).
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 >>