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Meritor (MTOR) Q1 Earnings Beat, Revenues Miss Estimates

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Share price of Meritor, Inc.MTOR decreased 3.34% to $15.02 on Feb 2 as the first quarter earnings and revenues decreased year over year. The company logged adjusted income of 25 cents per share for the fiscal quarterof fiscal 2017 (ended Dec. 31, 2016) that surpassed the Zacks Consensus Estimate of 19 cents. However, earnings decreased from the year ago figure of 33 cents per share. Adjusted net income fell to $22 million from the year-ago figure of $31 million.

Revenues fell 13.6% year over year to $699 million and missed the Zacks Consensus Estimate of $735 million. The decrease in sales was primarily due to lower production in the North America Class 8 truck market.

Meritor's adjusted EBITDA decreased to $64 million from $76 million recorded in the year-ago quarter. Adjusted EBITDA margin was 9.2%, compared to 9.4% in the year-ago quarter. Decline in revenues adversely impacted adjusted EBITDA and EBITDA margin, partially offset by material, labor and burden performance.

Meritor, Inc. Price, Consensus and EPS Surprise

Meritor, Inc. Price, Consensus and EPS Surprise | Meritor, Inc. Quote

Segment Results

Revenues from the Commercial Truck & Industrial segment fell $94 million to $539 million in the reported quarter. Segment EBITDA was $42 million, down $10 million from the year-ago quarter. EBITDA margin decreased to 7.8% from 8.2% in the prior-year quarter. The decrease in segment EBITDA margin was primarily due to lower sales in North America, partially offset by material, labor and burden performance.

Revenues from the Aftermarket & Trailer segment fell $19 million to $184 million in the reported quarter due to lower volumes across the segment. Segment EBITDA was $22 million, up $2 million from the year-ago quarter. EBITDA margin was 12%, compared to the year-ago quarter figure of 9.9%. The margin improvement was backed by material, labor and burden performance.

Financial Position

Meritor's cash and cash equivalents totaled $125 million as of Dec 31, 2016, compared with $128 million as of Dec 31, 2015. Total debt amounted to $994 million as of Dec 31, 2016, compared with $1.06 billion as of Dec 31, 2015.

In first-quarter fiscal 2017, Meritor's cash outflow from operating activities was $14 million compared with an outflow of $5 million in the prior-year period. Capital expenditures decreased to $17 million from the year-ago figure of $22 million. Free cash flow was a negative $31 million compared with a negative $27 million in the year-ago quarter.

Share Repurchases

The company didn't repurchase any share in the reported quarter.

Outlook

Meritor remains on track to meet its guidance for fiscal year 2017. The company expects revenues to range from $3−$3.1 billion, lower than $3.2 billion earned in fiscal 2016. Adjusted EBITDA margin is likely to be 9.6-10%. Adjusted earnings from continuing operations are expected to be in the range of $1.25-$1.40 per share, also lower than the year-ago period earnings of $1.64 per share.

Further, for fiscal 2017, the company expects free cash flow of $50-$70 million and operating cash flow of $140-$160 million.

Price Performance

Meritor has outperformed the Zacks-categorized Automotive-Original Equipment industry over the past three months. During this period, the company's share price increased 49.5%, while the industry saw a 17% increase. Meritor benefited from new business and better-than-expected results.

Zacks Rank & Other Stocks to Consider

Meritor currently carries a Zacks Rank #2 (Buy).

Other favorably placed auto stocks include Ferrari N.V. RACE , Sparton Motors Inc SPAR and Wabash National Corporation WNC . All the three stocks sport Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Ferrari has long-term expected growth rate of 17.5%.

Sparton Motors has long-term expected growth rate of 15%.

Wabash National has long-term expected growth rate of 21.5%.

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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.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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