Meritor (MTOR) Stock Slides on Settlement Agreement

NEW YORK (TheStreet) -- Meritor (MTOR) stock is down on news its subsidiary with ZF Friedrichshafen AG reached a settlement agreement with Eaton Corporation. Joint venture ZF Meritor will receive net proceeds of $209 million from the $500 million antitrust suit settlement. 

The settlement agreement is subject to ZF AG corporate approval, expected to occur in early July. Meritor expects to receive proceeds from the settlement in mid-July. 

By midmorning, Meritor shares had dropped 11.8% to $12.87, likely a result of net proceeds from the suit coming in lower than expected. 

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Separately, TheStreet Ratings team rates MERITOR INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate MERITOR INC (MTOR) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and increase in net income. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."

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

  • The revenue growth came in higher than the industry average of 6.5%. Since the same quarter one year prior, revenues slightly increased by 5.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 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 125.0% when compared to the same quarter one year prior, rising from -$4.00 million to $1.00 million.
  • 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 ($0.60 versus -$0.21).
  • Powered by its strong earnings growth of 50.00% and other important driving factors, this stock has surged by 104.21% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
  • The gross profit margin for MERITOR INC is currently extremely low, coming in at 13.83%. 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 0.10% trails the industry average.
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