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Meritor (MTOR) Earnings Surpass Estimates in Q1, Rise Y/Y

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Shares of Meritor, Inc. (MTOR - Free Report) have gained 9.9% in a day’s trading, following the first-quarter fiscal 2019 (ended Dec 31, 2018) earnings release. During the reported quarter, the company recorded adjusted earnings of 79 cents per share compared with 62 cents a year ago. The figure surpassed the Zacks Consensus Estimate of 60 cents.

Adjusted income from continuing operations was $69 million compared with $55 million in first-quarter fiscal 2018.

Sales increased approximately 15% year over year to $1.04 billion. The top line also beat the Zacks Consensus Estimate of $967.8 million. This rise was due to improved market share and increased truck production, primarily in North America.

Meritor, Inc. Price, Consensus and EPS Surprise

 

Meritor’s adjusted EBITDA (earnings before interest, tax, depreciation and amortization) increased to $119 million compared with $99 million a year ago. Adjusted EBITDA margin was 11.5% compared with 11% a year ago. Gain in adjusted EBITDA and adjusted EBITDA margin were due to higher revenues, and increased earnings from unconsolidated affiliates.

Segment Results

Revenues from the Commercial Truck & Trailer segment increased to $824 million, up 16% from the same period of the last fiscal year. The segment’s adjusted EBITDA increased to $79 million, up $10 million from the year-ago quarter. EBITDA margin declined to 9.6% from 9.7% in the same period of the last fiscal year.

Revenues from the Aftermarket & Industrial segment were $257 million, up 12% from the year-ago quarter. This gain was primarily due to increased aftermarket volume across North America and higher sales in the Industrial business. The segment’s adjusted EBITDA was $38 million, up $6 million from the same time frame a year ago. EBITDA margin moved up to 14.8% from 14% in the preceding fiscal year.

Financial Position

For the reported quarter, Meritor’s cash and cash equivalents totaled $127 million as of Dec 31, 2018, compared with $116 million as of Dec 31, 2017. Long-term debt was $731 million at the end of first-quarter fiscal 2019 from $730 million at the end of fiscal 2018.

Meritor’s cash inflow from operating activities was $11 million compared with $33 million in the year-ago quarter. During the quarter under review, capital expenditure was $23 million compared with $18 million a year ago.

Share Repurchase

During the reported quarter, the company repurchased 3 million common shares for $50 million.

Outlook

In fiscal 2019, Meritor expects sales of approximately $4.3 billion. Net income is anticipated to be approximately $265 million and adjusted EBITDA is projected to be $495 million. Adjusted earnings per share from continuing operations are projected to be $3.30.

Zacks Rank & Stocks to Consider

Meritor currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader auto sector are Dana Incorporated (DAN - Free Report) , General Motors Company (GM - Free Report) and Genuine Parts Company (GPC - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Dana has an expected long-term growth rate of 2.9%. Share price of the company has increased 28.9% in the past month.

General Motors has an expected long-term growth rate of 8.5%. Over the past month, shares of the company have gained 15%.

Genuine Parts has an expected long-term growth rate of 5%. Shares of the company have gained 2.4% in the past month.

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