Meritor Remains Neutral - Analyst Blog
May 14 2013 - 1:10PM
Zacks
On May 13, we maintained our Neutral recommendation on
Meritor Inc. (MTOR), based on its expansion of
global manufacturing footprint by outsourcing to low-cost
countries. These outsourcing efforts allow the company to adjust
its production levels.
However, we are concerned about the high customer concentration,
recent turmoil in the global economy and the year-over-year decline
in the company’s profits in the second quarter of fiscal 2013.
Why Maintained?
On Apr 30, Meritor Inc. reported a significant fall in the adjusted
income to $6.0 million or 6 cents per share in the second quarter
of fiscal 2013 compared with $32.0 million or 33 cents in the
year-ago quarter. However, earnings per share surpassed the Zacks
Consensus Estimate by 5 cents.
Revenues went down 21.7% to $908.0 million, missing the Zacks
Consensus Estimate of $934.0 million. The decline in revenues was
due to lower sales volumes in global markets, excluding South
America.
Following the release of the second-quarter results, the Zacks
Consensus Estimate for fiscal 2013 increased 19.2% to 31 cents per
share, but the same for fiscal 2014 dropped 2.9% to 66 cents.
Currently, shares of Meritor maintain a Zacks Rank #3 (Hold).
Meritor will benefit from its focus on OEMs based in Asia and South
America. The company plans to extend its footprint in the low-cost
countries with new plants, especially in China and India.
The company also plans to develop several significant business
projects in South America. In addition to this, Meritor aims to
boost revenues and earnings by focusing on improving its research,
development, engineering and product design capabilities.
However, Meritor faces challenges from its high customer
concentration. About 71% of its revenues are generated from the top
ten customers, with AB Volvo, Navistar
International (NAV) and Daimler AG contributing about 22%,
15% and 11%, respectively.
Other Stocks to Look For
A few stocks that are performing well in the broader industry
include Visteon Corp. (VC) and Tower
International, Inc. (TOWR). Both the companies carry a
Zacks Rank #1 (Strong Buy).
MERITOR INC (MTOR): Free Stock Analysis Report
NAVISTAR INTL (NAV): Free Stock Analysis Report
TOWER INTL INC (TOWR): Free Stock Analysis Report
VISTEON CORP (VC): Free Stock Analysis Report
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