A month has gone by since the last earnings report for Meritor . Shares were flat in that time frame, underperforming the S&P 500.
But investors have to be wondering, will the recent trend continue leading up to its next earnings release, or is Meritor due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Meritor Q4 Earnings Top, Revenues Decline Y/Y
Meritor, Inc. adjusted earnings of 83 cents per share in fourth-quarter fiscal 2019 (ended Sep 30, 2019), which surpassed the Zacks Consensus Estimate of 68 cents. In the year-ago quarter, the bottom line was 82 cents per share. The outperformance resulted from higher-than-anticipated sales at the Aftermarket & Industrial segment.
Adjusted income from continuing operations was $70 million compared with $73 million in fourth-quarter fiscal 2018.
Sales declined 4.81% year over year to $1.03 billion and missed the Zacks Consensus Estimate of $1.05 billion. The year-over-year decline was led by lower production in India, Europe and China.
Meritor’s adjusted EBITDA (earnings before interest, tax, depreciation and amortization) dropped to $116 million from $118 million in the year-ago quarter. Adjusted EBITDA margin was 11.3% compared with 10.9% a year ago on lower net steel, premium and freight costs.
Segment Results
Revenues at the Commercial Truck & Trailer segment amounted to $728 million in fourth-quarter 2019, down 11% from the year-ago quarter level due to lower production in India, Europe and China. The segment’s adjusted EBITDA fell to $69 million from $74 million in the year-ago quarter. EBITDA margin rose to 9.5% from 9.1% in the prior-year quarter on lower net steel, premium and freight costs.
Revenues at the Aftermarket & Industrial segment totaled $341 million, up 11% from the year-ago quarter level, primarily backed by revenues generated from the AxleTech acquisition. The segment’s adjusted EBITDA was $44 million compared with $42 million in the year-ago quarter. EBITDA margin declined to 12.9% from 13.7% in the fourth quarter of fiscal 2018 owing to the AxleTech acquisition which dented margins as certain targeted synergies were not fully realized in the quarter.
Financial Position
In the reported quarter, Meritor’s cash and cash equivalents totaled $108 million as of Sep 30, 2019, compared with $115 million as of Sep 30, 2018. Long-term debt was $902 million at the end of the fiscal fourth quarter compared with $730 million at the end of fourth-quarter fiscal 2018. The debt-to-capital ratio was 60.93%, as of Sep 30, 2019.
Meritor’s cash inflow from operating activities was $62 million compared with $60 million in the year-ago quarter. During the quarter under review, capital expenditure was $40 million compared with $52 million in the year-ago quarter.
Share Repurchase
In fiscal 2019, Meritor repurchased 5.3 million shares of common stock for $95 million. The company also approved an increase in the share repurchase authorization from $250 million to $325 million in the year.
Fiscal 2020 Outlook
In fiscal 2020, Meritor expects sales in the range of $3.7-$3.8 billion. Net income from continuing operations is anticipated in the band of $145-$155 million. Adjusted earnings per share from continuing operations are projected in the range of $2.75-$2.85.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions. The consensus estimate has shifted -11.11% due to these changes.
VGM Scores
At this time, Meritor has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Meritor has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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How Has MTOR Performed 30 Days Post Earnings
A month has gone by since the last earnings report for Meritor . Shares were flat in that time frame, underperforming the S&P 500.
But investors have to be wondering, will the recent trend continue leading up to its next earnings release, or is Meritor due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Meritor Q4 Earnings Top, Revenues Decline Y/Y
Meritor, Inc. adjusted earnings of 83 cents per share in fourth-quarter fiscal 2019 (ended Sep 30, 2019), which surpassed the Zacks Consensus Estimate of 68 cents. In the year-ago quarter, the bottom line was 82 cents per share. The outperformance resulted from higher-than-anticipated sales at the Aftermarket & Industrial segment.
Adjusted income from continuing operations was $70 million compared with $73 million in fourth-quarter fiscal 2018.
Sales declined 4.81% year over year to $1.03 billion and missed the Zacks Consensus Estimate of $1.05 billion. The year-over-year decline was led by lower production in India, Europe and China.
Meritor’s adjusted EBITDA (earnings before interest, tax, depreciation and amortization) dropped to $116 million from $118 million in the year-ago quarter. Adjusted EBITDA margin was 11.3% compared with 10.9% a year ago on lower net steel, premium and freight costs.
Segment Results
Revenues at the Commercial Truck & Trailer segment amounted to $728 million in fourth-quarter 2019, down 11% from the year-ago quarter level due to lower production in India, Europe and China. The segment’s adjusted EBITDA fell to $69 million from $74 million in the year-ago quarter. EBITDA margin rose to 9.5% from 9.1% in the prior-year quarter on lower net steel, premium and freight costs.
Revenues at the Aftermarket & Industrial segment totaled $341 million, up 11% from the year-ago quarter level, primarily backed by revenues generated from the AxleTech acquisition. The segment’s adjusted EBITDA was $44 million compared with $42 million in the year-ago quarter. EBITDA margin declined to 12.9% from 13.7% in the fourth quarter of fiscal 2018 owing to the AxleTech acquisition which dented margins as certain targeted synergies were not fully realized in the quarter.
Financial Position
In the reported quarter, Meritor’s cash and cash equivalents totaled $108 million as of Sep 30, 2019, compared with $115 million as of Sep 30, 2018. Long-term debt was $902 million at the end of the fiscal fourth quarter compared with $730 million at the end of fourth-quarter fiscal 2018. The debt-to-capital ratio was 60.93%, as of Sep 30, 2019.
Meritor’s cash inflow from operating activities was $62 million compared with $60 million in the year-ago quarter. During the quarter under review, capital expenditure was $40 million compared with $52 million in the year-ago quarter.
Share Repurchase
In fiscal 2019, Meritor repurchased 5.3 million shares of common stock for $95 million. The company also approved an increase in the share repurchase authorization from $250 million to $325 million in the year.
Fiscal 2020 Outlook
In fiscal 2020, Meritor expects sales in the range of $3.7-$3.8 billion. Net income from continuing operations is anticipated in the band of $145-$155 million. Adjusted earnings per share from continuing operations are projected in the range of $2.75-$2.85.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions. The consensus estimate has shifted -11.11% due to these changes.
VGM Scores
At this time, Meritor has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Meritor has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.