On Jan 8, 2015, we issued an updated research report on Meritor, Inc. (MTOR). This Zacks Rank #1 (Strong Buy) stock had reported positive earnings surprises in each of the last four quarters with an astounding average beat of 105.3%.
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. Earnings increased significantly from 13 cents in the year-ago quarter.
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 remains committed to 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 aims to achieve 10% adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margin for fiscal-year 2016. Further, it expects to produce incremental run-rate booked revenues of $500 million per annum from the beginning of fiscal year 2013 to the end of fiscal year 2016.
The target of reducing net debt (including retirement benefit liabilities) by $400 million to less than $1.5 billion has already been achieved by the company. The plan will improve operational excellence and customer value, and reduce product costs.
For fiscal 2015, Meritor expects adjusted earnings from continuing operations between $1.20 and $1.30 per share, significantly higher than $1.02 per share in fiscal 2014. The company’s revenues are expected to be in line with the fiscal 2014 level of $3.8 billion. Adjusted EBITDA margin is likely to range from 8.8% to 9%, rising from 8.3% in fiscal 2014. Interest expense is projected to be in the range of $80–$90 million, down from $130 million in fiscal 2014.
Key Picks from the Sector
Investors interested in the auto industry could also consider stocks like Motorcar Parts of America, Inc. (MPAA), Gentherm Incorporated (THRM) and Douglas Dynamics, Inc. (PLOW), all sporting a Zacks Rank #1.
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