Meritor Beats on Q4 Earnings, Lags Revs - Analyst Blog

Meritor Inc.’s (MTOR) adjusted income dropped to $11 million or 11 cents per share in the fourth quarter of fiscal 2013 from $31 million or 32 cents in the year-ago quarter. However, earnings per share surpassed the Zacks Consensus Estimate of 8 cents.

Meritor posted a net profit of $41 million or 42 cents per share in the fourth quarter of fiscal 2013 compared with $5 million or 5 cents in the corresponding quarter last year.

Revenues fell 8% year on year to $909 million and also missed the Zacks Consensus Estimate of $955 million. Lower sales in the military business can be held accountable for the decline in revenues. Moreover, lower revenues from North America, India and China offset the increase in revenues from Europe and South America.

Adjusted EBITDA of Meritor declined to $70 million compared with $79 million in the fourth quarter of fiscal 2012 due to lower sales. Meanwhile, adjusted EBITDA margin was 7.7% compared with 8% in the year-ago quarter.

Fiscal 2013

Meritor reported earnings of $39 million or 40 cents per share for fiscal 2013, down from $111 million or $1.14 per share last year. Earnings per share surpassed the Zacks Consensus Estimate of 37 cents.

Net loss on a reported basis contracted to $22 million from $52 million in the last year. Meritor’s revenues went down 16% to $3.7 billion in fiscal 2013 from $4.4 billion a year ago mainly due to lower global sales.

Segment Results

Revenues from the Commercial Truck & Industrial segment fell 9.6% to $709 million in the reported quarter as the military business registered lower sales. Segment EBITDA decreased 14% to $54 million from $63 million in the year-ago quarter due to reduced sales. EBITDA margin fell to 7.6% from 8% in the prior-year quarter due to lower volumes, partially offset by material and structural cost reductions.

Revenues from the Aftermarket & Trailer segment decreased 0.9% to $233 million. Segment EBITDA increased 33% to $24 million from $18 million a year ago. EBITDA margin improved to 10.3% from 7.8% in the fourth quarter of fiscal 2012, driven by better pricing actions in North America and a decline in material and structural costs.

Financial Position

Meritor’s cash and cash equivalents increased to $318 million as of Sep 30, 2013 from $257 million as of Sep 30, 2012. Total debt increased to $1.14 billion as of Sep 30, 2013 from $1.06 billion as of Sep 30, 2012.

In fiscal 2013, Meritor had cash outflow of $96 million from operating activities compared with cash inflow of $77 million in fiscal 2012. Capital expenditures declined to $54 million from $89 million a year ago. Meritor had free cash outflow of $150 million in the period compared with $12 million in fiscal 2012.

Outlook

For fiscal 2014, Meritor expects revenues of $3.7 billion. Adjusted EBITDA margin is likely to be 7.5% and adjusted earnings from continuing operations are expected between 30 cents and 40 cents per share.

In addition, Meritor expects capital expenditures between $80 million and $90 million for the fiscal year. Interest expense is projected to be $105-$115 million.

Further, Meritor received incremental business worth $120 million during fiscal 2013. This business is expected to boost earnings from fiscal 2016.

Headquartered in Troy, Michigan, Meritor is a global automotive parts manufacturer and supplier to North America, Europe and other parts of the world. The company operates manufacturing facilities in North America, South America, Europe and Asia-Pacific.

Some of Meritor’s major customers include AB Volvo (VOLVY), Navistar International Corporation (NAV) and Daimler AG (DDAIF). Meritor retains a Zacks Rank #3 (Hold).

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