On Dec 30, 2014, shares of Meritor, Inc. (MTOR) reached a new 52-week high of $15.43, before eventually closing at $15.39. The closing price represents a year-to-date return of 47.6%, much higher than the S&P 500’s total return of 12.6%.
Average volume of shares traded over the last three months is roughly 1.6 million. This Zacks Rank #1 (Strong Buy) stock looks set to perform well in the future with expected long-term earnings per share (EPS) growth rate of 29%.
Share Price Drivers
Meritor reported adjusted income of 35 cents per share in the fourth quarter of fiscal 2014 (ended Sep 30, 2014) that surpassed the Zacks Consensus Estimate of 16 cents. Also, earnings increased significantly from 13 cents in the year-ago quarter. Adjusted net income soared to $35 million in the reported quarter from $13 million in the fourth quarter of fiscal 2013.
Revenues increased 3.4% year over year to $933 million, beating the Zacks Consensus Estimate of $918 million. The year-over-year increase was attributable to higher sales in North America, partially offset by lower revenues in Europe, Defense and South America.
Meritor is focused on its three-year plan M2016, which aims at achieving margin, debt reduction and revenue growth through operational efficiency, enhancing customer value and reducing product costs. With this, the company plans to achieve 10% adjusted EBITDA margin for full-year 2016 and reduce net debt by $400 million to $1.5 billion. The company expects to record revenue increase of $500 million per year, driven by new products and new customers.
For fiscal 2015, Meritor expects its revenues to reach $3.8 billion. Adjusted EBITDA margin is likely to range from 8.8% to 9% while adjusted earnings from continuing operations are expected between $1.20 and $1.30 per share. Further, Meritor expects free cash flow to be $100 million.
Other Stocks to Consider
Investors interested in the auto industry may also consider stocks like Delphi Automotive PLC (DLPH), Gentex Corp. (GNTX) and Dana Holding Corporation (DAN), all carrying a Zacks Rank #2 (Buy).
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