Why Meritor (MTOR) Is Up Today

NEW YORK (TheStreet) -- Meritor (MTOR) gained 9.1% to $10.51 Wednesday after its fiscal first-quarter earnings beat analysts' earnings estimates by 5 cents a share.

Meritor posted earnings of 12 cents a share, beating the Capital IQ Consensus Estimate of 7 cents a share. The auto parts company posted a year-over-year revenue increase of 1.8% to $907 million; consensus estimates were $912.66 million.

Meritor also reaffirmed guidance for 2014. The company expects earnings of between 30 cents and 40 cents a share for the year, compared to consensus estimates of 41 cents a share. Meritor expects revenue of $3.7 billion for 2014, slightly higher than the consensus estimate of $3.67 billion.

TheStreet Ratings team rates MERITOR INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about its recommendation:

"We rate MERITOR INC (MTOR) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Net operating cash flow has significantly decreased to -$23.00 million or 141.81% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The gross profit margin for MERITOR INC is currently extremely low, coming in at 13.09%. Regardless of MTOR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 4.51% trails the industry average.
  • Despite the weak revenue results, MTOR has outperformed against the industry average of 22.1%. Since the same quarter one year prior, revenues slightly dropped by 7.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • MERITOR INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MERITOR INC swung to a loss, reporting -$0.21 versus $0.72 in the prior year. This year, the market expects an improvement in earnings ($0.39 versus -$0.21).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Machinery industry. The net income increased by 720.0% when compared to the same quarter one year prior, rising from $5.00 million to $41.00 million.

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