Story updated at 9:55 am.m to reflect market activity.
Shares of Meritor were gaining 0.7% to $13.95 in morning trading.
Analyst Brian A. Johnson said the auto parts company's margins tracked ahead of plans, despite its flat revenue. "The ongoing self-help story should provide upside earnings potential as volumes improve (MTOR now expects to hit 10% EBITDA margins in FY'16 despite lower revenues)," Johnson wrote.
The analyst continued, "We attribute the better-than-expected margin performance to ongoing self-help improvements related to material performance, labor/burden performance, and pricing actions. Despite margins tracking ahead of plan, we remain optimistic on potential margin upside as profitability improves in Europe, Aftermarket & Trailer margins get a boost from the Mascot divestiture, and the company continues to convert on incremental revenue."
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 solid stock price performance, compelling growth in net income and good cash flow from operations. However, as a counter to these strengths, we find that revenues have generally been declining."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Powered by its strong earnings growth of 713.15% and other important driving factors, this stock has surged by 77.00% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- 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 715.8% when compared to the same quarter one year prior, rising from -$38.00 million to $234.00 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 ($0.75 versus -$0.21).
- MTOR, with its decline in revenue, slightly underperformed the industry average of 2.3%. Since the same quarter one year prior, revenues slightly dropped by 0.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The gross profit margin for MERITOR INC is currently extremely low, coming in at 14.20%. 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, MTOR's net profit margin of 23.73% significantly outperformed against the industry.
- You can view the full analysis from the report here: MTOR Ratings Report