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Meritor (MTOR) Q3 Loss Narrower Than Expected, Revenues Top

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Meritor, Inc. (MTOR - Free Report) posted an adjusted loss of 47 cents per share in third-quarter fiscal 2020 (ended Jun 30, 2020), narrower than the Zacks Consensus Estimate of loss of 69 cents. Higher-than-anticipated revenues from the Commercial Truck & Trailer segment resulted in this narrower-than-estimated loss. Revenues from the segment came in at $336 million, beating the consensus mark of $222 million.

The bottom line declined from the year-ago adjusted earnings of $1.20 a share. Adjusted loss from continuing operations was $34 million as against the adjusted income of $103 million recorded in third-quarter fiscal 2019.

Sales plummeted 56% year over year to $514 million in the fiscal third quarter. This year-over-year decline was due to lower market volumes resulting from weak customer demand and government mandates amid the coronavirus pandemic. However, the reported figure surpassed the Zacks Consensus Estimate of $456 million in the quarter.

Adjusted EBITDA tanked to $7 million from the year-earlier quarter’s $146 million. Adjusted EBITDA margin was 1.4% compared with the prior year’s 12.5%.

 

Meritor, Inc. Price, Consensus and EPS Surprise

Meritor, Inc. Price, Consensus and EPS Surprise

Meritor, Inc. price-consensus-eps-surprise-chart | Meritor, Inc. Quote

Segment Results

Revenues in the Commercial Truck & Trailer segment amounted to $336 million in the fiscal third quarter, slumping 64% year over year on lower market volumes, resulting from decreased customer demand and government mandates amid the pandemic. However, the figure outpaced the Zacks Consensus Estimate of $222 million. The segment reported negative adjusted EBITDA of $23 million as against the positive EBITDA of $97 million witnessed in the year-ago quarter. EBITDA margin declined to negative 6.8% during the quarter from the positive 10.5% recorded in the prior-year quarter.

Revenues in the Aftermarket & Industrial segment totaled $203 million, down 28% from the year-ago level, primarily on dismal production volumes across most markets served, partly offset by revenues generated from the AxleTech acquisition. The revenue figure also missed the Zacks Consensus Estimate of $222 million. The segment’s adjusted EBITDA was $31 million compared with the year-ago quarter’s $50 million. EBITDA margin declined to 15.3% from the prior-year period’s 17.7%.

Financial Position

In the reported quarter, Meritor’s cash and cash equivalents summed $280 million as of Jun 30, 2020, compared with $108 million as of Sep 30, 2019. Long-term debt was $1,193 million at the end of the fiscal third quarter, marking a rise from $902 million as of Sep 30, 2019.

Meritor’s cash outflow from operating activities as of Jun 30, 2020, was $102 million, as against the inflow of $143 million witnessed in the year-ago quarter. For the quarter ended Jun 30, 2020, capital expenditure was $12 million compared with the year-ago quarter’s $19 million.

Outlook

For fourth-quarter fiscal 2020, Meritor projects sales of $700 million approximately. Cash flow from operations and free cash flow are anticipated to be around $65 million and $25 million, respectively. Further, the firm anticipates adjusted net loss from continuing operations of approximately 10 cents.

Zacks Rank & Stocks to Consider

Currently, Meritor carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the auto sector include Sonic Automotive Inc. (SAH - Free Report) , AutoNation (AN - Free Report) and LCI Industries (LCII - Free Report) . While Sonic Automotive and AutoNation flaunt a Zacks Rank of 1 (Strong Buy), LCI Industries carries a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Sonic Automotive have climbed 38.6%, year to date, compared with the industry’s rise of 8%.

Shares of AutoNation have rallied 11.4%, year to date, compared with the industry’s gain of 7.9%.

Shares of LCI Industries have appreciated 15%, year to date, as against the industry’s decline of 7%.

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