Meritor's (MTOR) Q1 Earnings Beat, Sales Miss, Increase Y/Y

Zacks Equity Research

February 4, 2022 4 min read

Meritor, Inc. MTOR posted adjusted earnings per share of 80 cents in first-quarter fiscal 2022, increasing 33.3% from 60 cents in the year-ago quarter. The metric also beat the Zacks Consensus Estimate of 75 cents on higher-than-expected revenues from the Commercial Truck & Trailer segment. Adjusted income from continuing operations was $57 million in the reported quarter, increasing from $43 million recorded in the prior-year quarter.

Sales grew 11% year over year to $984 million in the fiscal first quarter. The top line, however, missed the Zacks Consensus Estimate of $1,002 million.

Adjusted EBITDA went up to $113 million from the year-earlier quarter’s $102 million. The upside stemmed from higher sales volumes, partially offset by higher steel costs. Adjusted EBITDA margin remained flat at 11.5%.

Segment Results

In the reported quarter, revenues from the Commercial Truck & Trailer segment amounted to $785 million, growing 14% year over year on higher global truck production in all markets. The figure also topped the Zacks Consensus Estimate of $773 million. The segment reported an adjusted EBITDA of $69 million, rising from $63 million witnessed in the year-ago quarter. The figure, however, missed the consensus mark of $73 million. EBITDA margin came in at 8.8% during the quarter, down from 9.1%.

Quarterly revenues in the Aftermarket & Industrial segment totaled $241 million, up 3% from the year-ago level on higher pricing in the quarter. The revenue figure, however, missed the Zacks Consensus Estimate of $264 million. The segment’s adjusted EBITDA was $38 million, an increase of $3 million from the year-ago quarter. The figure narrowly missed the consensus mark of $38.28 million. EBITDA margin came in at 15.8%, up from 15% recorded in the prior-year quarter, primarily due to cost savings from the footprint optimization restructuring initiatives.

Financial Position

In the reported quarter, Meritor’s cash and cash equivalents summed $113 million as of Dec 31, 2021, falling from $283 million as of Dec 31, 2020. Long-term debt was $1,027 million at the end of the quarter, up from $1,008 million reported in the fourth quarter of fiscal 2021.

During the fiscal first quarter, Meritor’s cash used from operating activities was $21 million against $44 million of cash provided by operating activities in the year-ago quarter.

Free cash flow (FCF) in the reported quarter was a negative $39 million against a positive FCF of $34 million recorded in the same period last year. In the quarter ended Dec 31, 2021, capital expenditure was $18 million compared with the $10 million incurred in the year-ago quarter.

Fiscal 2022 Outlook Reiterated

For fiscal 2022, Meritor’s guidance remains the same. Sales are projected in the range of $4.1-$4.3 billion. The company projects adjusted earnings per share to be in the band of $3.25-$3.75. Cash flow from operations is anticipated in the range of $275-$320 million and free cash flow in the band of $175-$200 million.

Zacks Rank & Key Picks

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

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