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Meritor (MTOR) Shares Barely Move Since Q2 Earnings Beat

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Meritor, Inc.’s (MTOR) shares failed to move higher even though the company delivered fiscal second-quarter 2021 earnings and sales beat on May 4. Since then, the stock has decreased by 3 cents to close the session at $27.06 on May 7. While the firm managed to beat estimates, its bottom line declined year over year, which seems to have disappointed investors. Discouragingly, the Zacks Rank #5 (Strong Sell) company’s free cash flow also plummeted from $292 million recorded a year ago to $47 million for the quarter under review.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings & Revenue Snapshots

Meritor posted adjusted earnings per share of 68 cents for second-quarter fiscal 2021 (ended Mar 31, 2021), surpassing the Zacks Consensus Estimate of 65 cents. Higher-than-anticipated revenues and profit from the Commercial Truck & Trailer segment resulted in this outperformance.

The bottom line, however, declined from the year-ago adjusted earnings of 74 cents a share. Sales rose 12.8% year over year to $983 million for the fiscal second quarter and surpassed the Zacks Consensus Estimate of $950 million.

Adjusted EBITDA edged up to $111 million from the year-earlier quarter’s $107 million. However, adjusted EBITDA margin was 11.3% compared with the prior year’s 12.3%.

Segment Results

For the March-end quarter, revenues in the Commercial Truck & Trailer segment amounted to $777 million, up 23% year over year on higher market volumes in all markets served. Moreover, the figure outpaced the Zacks Consensus Estimate of $735 million. The segment reported adjusted EBITDA of $73 million, up from $58 million witnessed in the year-ago quarter on higher sales and cost-cut efforts. The figure also surpassed the consensus mark of $62 million. EBITDA margin expanded to 9.4% for the quarter from 9.2% recorded in the prior-year quarter.

Quarterly revenues in the Aftermarket & Industrial segment totaled $247 million, dropping 10.8% from the year-ago level on account of termination of the WABCO distribution arrangement. The revenue figure also missed the Zacks Consensus Estimate of $266 million. The segment’s adjusted EBITDA was $34 million, down from $46 million recorded in the prior-year period. The metric also fell shy of the consensus mark of $42.61 million. EBITDA margin contracted to 13.8% for the quarter from 16.6% during the year-ago period.

Financial Position

For the reported quarter, Meritor’s cash and cash equivalents summed $321 million as of Mar 31, 2021. Long-term debt was $1,186 million at fiscal second quarter-end.

Its cash flow from operating activities for the quarter under review was $63 million compared with cash used for operating activities of $309 million in the year-ago quarter. For the quarter ended Mar 31, 2021, capital expenditure was $16 million compared with $17 million incurred in the comparable year-ago period.

FY21 View

For fiscal 2021, Meritor — which shares space with Magna International (MGA - Free Report) , Allison Transmission (ALSN - Free Report) and Oshkosh Corporation (OSK - Free Report) — projects sales in the range of $3.65-$3.8 billion. Cash flow from operations and free cash flow are anticipated in the band of $205-$220 million and $110-$125 million, respectively. Further, the firm projects adjusted earnings per share in the band of $2.25-$2.50.

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