Meritor (MTOR) Q2 Earnings Top, Revenues Miss Estimates

Meritor, Inc. MTOR recorded adjusted earnings of 74 cents per share in second-quarter fiscal 2020 (ended Mar 31, 2020), surpassing the Zacks Consensus Estimate of 54 cents. The outperformance resulted from higher-than-anticipated EBITDA (earnings before interest, tax, depreciation and amortization) from the Aftermarket & Industrial segment. Precisely, EBITDA from the segment came in at $49 million, topping the consensus mark of $44.6 million.

The bottom line declined from the year-ago adjusted earnings of $1.03 a share. Adjusted income from continuing operations was $56 million compared with $88 million in second-quarter fiscal 2019.

Sales declined 24.6% year over year to $871 million and missed the Zacks Consensus Estimate of $890 million. The year-over-year decline was due to lower production volumes, partly offset by sales from Axle Tech, which was acquired by Meritor in fourth-quarter fiscal 2019.

Its adjusted EBITDA dropped to $107 million from $139 million in the year-ago quarter. Adjusted EBITDA margin was 12.3% compared with 12% a year ago.

Meritor, Inc. Price, Consensus and EPS Surprise

 

Meritor, Inc. Price, Consensus and EPS Surprise

Meritor, Inc. price-consensus-eps-surprise-chart | Meritor, Inc. Quote

Segment Results

Revenues at the Commercial Truck & Trailer segment amounted to $588 million in second-quarter fiscal 2020, down 33% from the year-ago level due to lower production volumes across most markets served amid the coronavirus crisis. The segment’s adjusted EBITDA fell to $55 million from $88 million in the year-ago quarter. EBITDA margin declined to 9.4% from 10% in the prior-year quarter.

Revenues at the Aftermarket & Industrial segment totaled $319 million, down 3% from the year-ago level, primarily due to lower production volumes across most markets served partly offset by revenues generated from the AxleTech acquisition. The segment’s adjusted EBITDA was $49 million, compared with $52 million in the year-ago quarter. EBITDA margin declined to 15.4% from 15.8% in the prior-year quarter.

Financial Position

In the reported quarter, Meritor’s cash and cash equivalents totaled $508 million as of Mar 31, 2020, compared with $108 million as of Sep 30, 2019. Long-term debt was $1,203 million at the end of second-quarter fiscal 2020, depicting a rise from $902 million as of Sep 30, 2019. As of Mar 31, 2020, total debt-to-capital ratio stood at 73.9.

Meritor’s cash outflow from operating activities as of Mar 31, 2020, was $309 million versus inflow of $40 million in the year-ago quarter. For the quarter ended Mar 31, 2020, capital expenditure was $17 million compared with $21 million in the year-ago quarter.

Meritor suspended its existing share-repurchase program until further notice on the heightening coronavirus scare.

2020 Outlook

Meritor scrapped the fiscal 2020 guidance as it expects that the pandemic’s impact to strain the company’s operations in the days to come.

For third-quarter fiscal 2020, Meritor now projects sales in the band of $400-$500 million. Cash flow from operations is anticipated in the range of negative $150 million to negative $225 million.

Zacks Rank & Stocks to Consider

Currently, Meritor has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same sector are Veoneer, Inc. VNE, Unique Fabricating, Inc. UFAB and Modine Manufacturing Company MOD, each carrying a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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