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Meritor (MTOR) Beats on Q4 Earnings, Guides Low for FY17
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Share price of Meritor, Inc. increased 2.2% to $12.29 on Nov 16 after the company reported adjusted income of 34 cents per share for the fourth quarter (ended Sep 30, 2016) of fiscal 2016 that surpassed the Zacks Consensus Estimate of 30 cents. However, earnings decreased from 40 cents per share recorded a year ago. Adjusted net income fell to $30 million from $38 million in the fourth quarter of fiscal 2015.
On a reported basis, Meritor posted net income of $452 million or $5.10 per share in the fourth quarter of fiscal 2016, as against a loss of $21 million or 22 cents per share in the prior-year quarter.
Revenues fell 15% year over year to $728 million and missed the Zacks Consensus Estimate of $748 million. The year-over-year decline is attributable to lower truck production in North America.
Meritor’s adjusted EBITDA decreased to $74 million from $81 million recorded in the year-ago quarter. Adjusted EBITDA margin was 10.2%, compared with 9.5% in the year-ago quarter. The rise in adjusted EBITDA margin stemmed from lower material, labor and burden costs, and an insurance settlement in the reported quarter, partially offset by lower sales in North America.
For fiscal 2016, Meritor’s sales declined 9% year over year to $3.199 billion due to lower commercial truck production in North and South America, along with the impact of currency headwinds. The annual revenue narrowly missed the Zacks Consensus Estimate of $3.22 billion.
Meritor’s adjusted earnings for fiscal 2016 were $151 million or $1.64 per share, compared with $159 million or $1.59 per share earned in fiscal 2015. Adjusted earnings beat the Zacks Consensus Estimate of $1.60 per share.
Segment Results
Revenues from the Commercial Truck & Industrial segment fell 17% to $541 million in the reported quarter. The decline was owing to lower truck production in the North America Class 8 truck market.
Segment EBITDA was $39 million, down $6 million from the year-ago quarter. EBITDA margin increased to 7.2% from 6.9% in the prior-year quarter. The margin improvement was backed by lower material, labor and burden costs along with insurance settlements, partially offset by lower revenue.
Revenues from the Aftermarket & Trailer segment fell 8% to $212 million in the reported quarter due to lower revenue in North America. Segment EBITDA was $29 million, down from $37 million in the year-ago quarter. EBITDA margin was 13.7%, down 2.3% from the year-ago quarter.
Financial Position
Meritor’s cash and cash equivalents totaled $160 million as of Sep 30, 2016, compared with $193 million as of Sep 30, 2015. Total debt amounted to $996 million as of Sep 30, 2016, compared with $1.05 billion as of Sep 30, 2015.
In fiscal 2016, Meritor’s cash flow from operating activities was $204 million compared with $97 million in the prior-year period. Capital expenditures increased to $93 million from $79 million a year ago. Free cash flow was $111 million compared with $18 million in the year-ago quarter.
Share Repurchases
In fiscal 2016, Meritor repurchased 8.7 million shares for $81 million. Thus, the company has completed its $210 million repurchase program. In addition, it bought back a total of $55 million in convertible debt during the program, which helped to lower interest expense, improve debt maturity profile and mitigate long-term equity dilution risk.
Outlook
For fiscal 2017, Meritor expects revenues to range from $3−$3.1 billion, lower than $3.2 billion earned in fiscal 2016. Adjusted EBITDA margin is likely to be 9.6%–10%. Adjusted earnings from continuing operations are expected to be in the range of $1.25–$1.40 per share, also lower than earnings of $1.64 per share recorded in fiscal 2016.
Further, for fiscal 2017, the company expects free cash flow of $50–$70 million and operating cash flow of $140–$160 million.
Meritor has completed its three-year plan, M2016, which was aimed at achieving margin, debt reduction and revenue growth through operational efficiency, enhancement of customer value and reduction of product costs. For fiscal 2017, the company expects challenging end markets but intends to maintain the strength in margins as well as its bottom line.
Meritor currently carries a Zacks Rank #5 (Strong Sell).
Some better-ranked auto stocks include Allison Transmission Holdings, Inc. (ALSN - Free Report) America's Car-Mart Inc. (CRMT - Free Report) and Rush Enterprises, Inc. (RUSHA - Free Report) .
Allison Transmission, sporting a Zacks Rank #1 (Strong Buy), has a long term growth rate of 11%.
Rush Enterprises, carrying a Zacks Rank #2 (Buy), has a long-term expected growth rate of 15%, compared to the industry average of 13.20%.
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Meritor (MTOR) Beats on Q4 Earnings, Guides Low for FY17
Share price of Meritor, Inc. increased 2.2% to $12.29 on Nov 16 after the company reported adjusted income of 34 cents per share for the fourth quarter (ended Sep 30, 2016) of fiscal 2016 that surpassed the Zacks Consensus Estimate of 30 cents. However, earnings decreased from 40 cents per share recorded a year ago. Adjusted net income fell to $30 million from $38 million in the fourth quarter of fiscal 2015.
On a reported basis, Meritor posted net income of $452 million or $5.10 per share in the fourth quarter of fiscal 2016, as against a loss of $21 million or 22 cents per share in the prior-year quarter.
Revenues fell 15% year over year to $728 million and missed the Zacks Consensus Estimate of $748 million. The year-over-year decline is attributable to lower truck production in North America.
Meritor’s adjusted EBITDA decreased to $74 million from $81 million recorded in the year-ago quarter. Adjusted EBITDA margin was 10.2%, compared with 9.5% in the year-ago quarter. The rise in adjusted EBITDA margin stemmed from lower material, labor and burden costs, and an insurance settlement in the reported quarter, partially offset by lower sales in North America.
Fiscal 2016
For fiscal 2016, Meritor’s sales declined 9% year over year to $3.199 billion due to lower commercial truck production in North and South America, along with the impact of currency headwinds. The annual revenue narrowly missed the Zacks Consensus Estimate of $3.22 billion.
Meritor’s adjusted earnings for fiscal 2016 were $151 million or $1.64 per share, compared with $159 million or $1.59 per share earned in fiscal 2015. Adjusted earnings beat the Zacks Consensus Estimate of $1.60 per share.
Segment Results
Revenues from the Commercial Truck & Industrial segment fell 17% to $541 million in the reported quarter. The decline was owing to lower truck production in the North America Class 8 truck market.
Segment EBITDA was $39 million, down $6 million from the year-ago quarter. EBITDA margin increased to 7.2% from 6.9% in the prior-year quarter. The margin improvement was backed by lower material, labor and burden costs along with insurance settlements, partially offset by lower revenue.
Revenues from the Aftermarket & Trailer segment fell 8% to $212 million in the reported quarter due to lower revenue in North America. Segment EBITDA was $29 million, down from $37 million in the year-ago quarter. EBITDA margin was 13.7%, down 2.3% from the year-ago quarter.
Financial Position
Meritor’s cash and cash equivalents totaled $160 million as of Sep 30, 2016, compared with $193 million as of Sep 30, 2015. Total debt amounted to $996 million as of Sep 30, 2016, compared with $1.05 billion as of Sep 30, 2015.
In fiscal 2016, Meritor’s cash flow from operating activities was $204 million compared with $97 million in the prior-year period. Capital expenditures increased to $93 million from $79 million a year ago. Free cash flow was $111 million compared with $18 million in the year-ago quarter.
Share Repurchases
In fiscal 2016, Meritor repurchased 8.7 million shares for $81 million. Thus, the company has completed its $210 million repurchase program. In addition, it bought back a total of $55 million in convertible debt during the program, which helped to lower interest expense, improve debt maturity profile and mitigate long-term equity dilution risk.
Outlook
For fiscal 2017, Meritor expects revenues to range from $3−$3.1 billion, lower than $3.2 billion earned in fiscal 2016. Adjusted EBITDA margin is likely to be 9.6%–10%. Adjusted earnings from continuing operations are expected to be in the range of $1.25–$1.40 per share, also lower than earnings of $1.64 per share recorded in fiscal 2016.
Further, for fiscal 2017, the company expects free cash flow of $50–$70 million and operating cash flow of $140–$160 million.
Meritor has completed its three-year plan, M2016, which was aimed at achieving margin, debt reduction and revenue growth through operational efficiency, enhancement of customer value and reduction of product costs. For fiscal 2017, the company expects challenging end markets but intends to maintain the strength in margins as well as its bottom line.
MERITOR INC Price, Consensus and EPS Surprise
MERITOR INC Price, Consensus and EPS Surprise | MERITOR INC Quote
Zacks Rank
Meritor currently carries a Zacks Rank #5 (Strong Sell).
Some better-ranked auto stocks include Allison Transmission Holdings, Inc. (ALSN - Free Report) America's Car-Mart Inc. (CRMT - Free Report) and Rush Enterprises, Inc. (RUSHA - Free Report) .
Allison Transmission, sporting a Zacks Rank #1 (Strong Buy), has a long term growth rate of 11%.
America's Car-Mart has witnessed positive estimate revisions over the last seven days. The company sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Rush Enterprises, carrying a Zacks Rank #2 (Buy), has a long-term expected growth rate of 15%, compared to the industry average of 13.20%.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research. See these stocks free >>