Meritor Upgraded to Neutral - Analyst Blog

By Zacks Equity Research,

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We have upgraded the long-term recommendation (more than 6 months) on the shares of Meritor Inc. ( MTOR ) from Underperform to Neutral based on its expanding global footprint, intensive focus on research and development, improved results and a promising earnings outlook.

Meritor intends to win significant business propositions from original equipment manufacturers (OEMs) in low-cost countries across Asia and South America. The company aims to achieve $1 billion in Asian revenues in 5 years.

Moreover, the company is upgrading its research, development, engineering and product design capabilities. In 2010, the company had announced plans to invest $23 million over the next five years in order to enhance its research and development capabilities at a technical center in its Troy, Michigan headquarters.

In the first quarter of fiscal 2012, the Zacks #3 Rank (Hold) company saw a profit of $11 million or 12 cents per share compared with a loss of $3 million or 4 cents per share in the same quarter of prior fiscal year (all excluding restructuring charges). However, the profit was lower than the Zacks Consensus Estimate of 20 cents per share.

Including restructuring charges, profit was $13 million or 13 cents per share in the quarter under review compared with a loss of $6 million or 7 cents per share in the prior-year quarter.

Sales went up 21% to $1.2 billion from the first quarter of fiscal 2011. This increase in sales was primarily driven by stronger truck demand in all regions.

Adjusted EBITDA rose 21.5% to $79 million from $65 million in the first quarter of fiscal 2011 due to the positive impact from increased sales, partially offset by higher material costs. Adjusted EBITDA margin was flat at 6.8% compared with the same period last year.

In the recent Mid-America Trucking Show, Meritor reaffirmed its earnings guidance for fiscal 2012. The company anticipates revenues to be $4.8 billion, adjusted EBITDA margin in the range of 8.2%-8.6%, adjusted profit in the range of $105 million-$135 million or $1.08-$1.39 per share for the full year. It compares with a corresponding $4.6 billion, 7.5%, $82 million or 85 cents per share in fiscal 2011.

Meritor is a global automotive parts manufacturer and supplier to various customers in North America, Europe and other parts of the world. It is a worldwide supplier of a broad range of integrated systems, modules and components for commercial, specialty and light vehicles worldwide, and has developed leading positions in most of its markets.

The company operates manufacturing facilities in 19 countries across North America, South America, Europe and Asia-Pacific. Some of its big customers include Volvo AB ( VOLVY ), Navistar International Corporation ( NAV ) and Daimler AG ( DDAIF ).

DAIMLER AG ( DDAIF ): Free Stock Analysis Report
MERITOR INC ( MTOR ): Free Stock Analysis Report
NAVISTAR INTL ( NAV ): Free Stock Analysis Report
VOLVO AB ADR B ( VOLVY ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: DDAIF , MTOR , NAV , VOLVY

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