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Auto Stock Roundup: Meritor & Copart's Earnings Beat, Tenneco to Buy Ohlins

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The earnings season is drawing to an end. Two auto companies — Meritor, Inc. (MTOR - Free Report) and Copart, Inc. (CPRT - Free Report) — reported their numbers in the past week. Both earnings and revenues for these companies surpassed the Zacks Consensus Estimate as well as came in higher than the prior-year quarter. During the quarter under review, Meritor witnessed improved market share, new business wins and improved production across all the key markets. Meanwhile, rise in vehicle sales and service revenues aided Copart’s performance.

The week also witnessed Tenneco Inc. (TEN - Free Report) announcing a deal to acquire a Swedish technology company, Ohlins Racing A.B. (Ohlins). This acquisition is likely to aid Tenneco to progress in the areas of intelligent suspension, autonomous driving and mobility. AutoNation, Inc. (AN - Free Report) partnered with Santa Monica-based car subscription company, Fair. This partnership signals toward the AutoNation’s unwavering commitment to embrace technology in car subscription to enhance customer experience.

Recap of the Week’s Most Important Stories

1.    Meritor recorded adjusted earnings of 82 cents per share in fourth-quarter fiscal 2018 (ended Sep 30, 2018) compared with 62 cents a year ago. The figure comfortably surpassed the Zacks Consensus Estimate of 78 cents.

Adjusted income from continuing operations was $73 million compared with $56 million in fourth-quarter fiscal 2017.

Sales increased approximately 17% year over year to $1.08 billion. The top line also beat the Zacks Consensus Estimate of $1.03 billion. This rise was due to improved market share, new business wins and improved production across all the key markets.

In fiscal 2018, Meritor recorded revenues of $4.2 billion, marking 25% rise from the prior fiscal year. Net income from continuing operations was $120 million or $1.31 per share.

Meritor’s adjusted EBITDA (earnings before interest, tax, depreciation and amortization) increased to $118 million from $98 million a year ago. Adjusted EBITDA margin was 10.9% compared with 10.6% a year ago. Gain in adjusted EBITDA margin was driven by an increase in revenues and the positive impact of changes in the company's retiree medical benefits. These positives were partly offset by the sale of Meritor’s interest in Meritor WABCO joint venture along with elevated material and freight costs. (Read more: Meritor Q4 Earnings Surpass Estimates, Increase Y/Y)

Meritor currently carries a Zacks Rank #3 (Hold).

2.    Tenneco announced that it inked a deal to acquire a Swedish technology company, Ohlins Racing A.B. (“Ohlins”). The acquisition of Ohlins, which develops suspension systems for the automotive and motorsport industries, is likely to aid Tenneco to progress in the areas of intelligent suspension, autonomous driving and mobility.

Subject to the satisfaction of certain customary closing conditions, the acquisition is likely to close in first-quarter 2019. Founder Kenth Ohlin will retain a minority stake in Ohlins and collaborate with Tenneco to continue with his technological vision. The excellent technology team of Ohlins will aid Tenneco to expand its product offerings for its present and future customers. This collaboration will also help in expanding Tenneco’s business in the mobility markets. The acquisition of Ohlins will speed up the development of advanced original equipment (OE) intelligent suspension solutions. (Read more: Tenneco's Ohlins Buyout to Expand Product Portfolio)

Tenneco currently carries a Zacks Rank #3.

3.    AutoNation announced that it collaborated with Santa Monica-based car subscription company, Fair. This partnership shows America’s largest automotive retailer’s unwavering commitment toward embracing technology in car subscription to enhance customer experience. This will provide customers with a new access to a ‘month-to-month subscription model’ that will allow the customers to acquire a vehicle through the Fair app anywhere.

This collaboration opens up new sales channel for AutoNation’s dealerships. Car shoppers can choose from the inventory through their smartphone. The subscription model of Fair offers consumer flexibility in personal transportation. This also allows them to keep a car for as long as they wish and leave it at any time, without bearing any penalty.

AutoNation offers vehicle maintenance and repair services, vehicle parts, extended service contracts, vehicle protection products, and other aftermarket products. This partnership holds huge potential and provides customers with an alternative car ownership option. (Read more: AutoNation Collaborates With Fair for Digital Technology)

AutoNation currently carries a Zacks Rank #3.

4.    Cooper Tire & Rubber Company (CTB - Free Report) announced that it opened a warehouse, spreading across one million square feet in Byhalia, MS. The new facility will supplement the existing U.S. distribution network of the Findlay, OH-based company, which manufactures and markets tires, and related products.

This is the largest distribution center of Cooper Tire in the country. This center is likely to aid it in consolidating and distributing products to customers in an effective way. Further, this center serves as a supply base for the company’s regional distribution centers. Moreover, the new facility can be expanded by additional 400,000 square feet in the future.

In third-quarter 2018, Cooper Tire’s earnings surpassed the Zacks Consensus Estimate, though it came in lower than the prior-year quarter figure. Per the company, the new facility will aid in enhancing the logistics infrastructure and support Cooper Tire’s initiatives to offer service to customers. (Read more: Cooper Tire Unveils Distribution Center in Mississippi)

Cooper Tire currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

5.    Copart reported adjusted earnings per share of 47 cents in first-quarter fiscal 2019 (ended Oct 31, 2018), beating the Zacks Consensus Estimate of 46 cents.  In the year-ago quarter, the bottom line was 33 cents.

Net income was $114.1 million, reflecting a surge of 47.2% or $36.6 million from first-quarter fiscal 2018.

Copart’s revenues rose 10.1% to $461.4 million from the year-ago quarter and surpassed the Zacks Consensus Estimate of $459 million. Compared with the prior-year quarter, service revenues increased to $394.8 million from $374.1 million. Revenues from vehicle sales gained $66.6 million in comparison with $45 million in the first-quarter fiscal 2018.

Gross profit improved 20% to $195.9 million from $163.3 million a year ago. Total operating expenses increased to $310 million from $295.2 million recorded in the prior-year period.

Operating income increased to $151.4 million from $124 million a year ago. (Read more: Copart Q1 Earnings & Revenues Drive Past Estimates)

Copart currently carries a Zacks Rank #3.

Performance

In the last week, Toyota Motor Corporation (TM - Free Report) gained the most while Ford Motor Company (F - Free Report) declined the most.

In the past six months, Advance Auto Parts, Inc. (AAP - Free Report) has increased the most, whereas Ford declined the most.

CompanyLast WeekLast 6 Months
GM0.9%-6.1%
F-4.5%-20.4%
TSLA-1.7%21.1%
TM2%-11.5%
HMC-1.3%-15.4%
HOG-3.5%-4.7%
AAP-1.7%41.7%
AZO-0.5%31.7%


What’s Next in the Auto Space?

Watch out for the usual news releases over the next week.

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