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Meritor Well Placed on Robust Backlog, Improving Trailer Unit

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On May 6, we issued an updated research report on Meritor, Inc. (MTOR - Free Report) .

The Troy, MI-based global automotive parts manufacturer and supplier reported second-quarter fiscal 2019 results on May 1. The company’s quarterly results were majorly driven by robust truck backlogs and improving trailer business in the U.S. market. During the quarter, its adjusted earnings were $1.03 per share and sales were$1.16 billion, beating the respective Zacks Consensus Estimate.

Despite plunging truck orders in recent months, Meritor’s strong backlogs aided revenue growth. Higher truck production in North America combined with revenue outperformance aided the company to witness 8% year-over-year rise in revenues. In fact, it expects higher production levels to continue throughout the current fiscal year. Also, strong global end-market support offers a bright spot for Meritor’s growth in fiscal 2019.

Meritor, Inc. Price and Consensus

 

Additionally, business gains by the company’s trailer unit during the second quarter of fiscal 2019 are likely to increase the top line. Offering products and systems for the production of trailers by leading manufacturers will improve its market share besides adding to the top line.

On the back of strong results in the first six months of fiscal 2019, Meritor expects to exceed its set M2019 objective of $2.84 as adjusted earnings per share. In fact, the company raised its guidance for the fiscal year on backlogs and improving market share. Sales are projected to be approximately $4.4 billion compared with previously mentioned $4.3 billion. Further, adjusted earnings per share from continuing operations are expected to be $3.50, rising from $3.30 mentioned earlier.

In the past year, shares of Meritor have outperformed the industry. The stock has gained 10.2% against the industry’s decline of 20.6% during that period.

 



Zacks Rank & Other Key Picks

Meritor currently sports a Zacks Rank #1 (Strong Buy). A few other top-ranked stocks in the auto space are PACCAR, Inc. (PCAR - Free Report) , Allison Transmission Holdings, Inc. (ALSN - Free Report) and Ford Motor Company (F - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PACCAR has an expected long-term growth rate of 8.4%. The company’s stock has seen the Zacks Consensus Estimate for earnings in 2019 being revised 3.9% upward over the past 30 days.

Allison Transmission has an expected current-year growth rate of 10%. The company’s stock has seen the Zacks Consensus Estimate for earnings in 2019 being revised 2.4% upward over the past 30 days.

Ford has an expected long-term growth rate of 8.1%. The company’s stock has seen the Zacks Consensus Estimate for earnings in 2019 being revised 14% upward over the past 30 days.

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