Meritor (MTOR) Trades Down Following 4Q EPS Beat; UBS Remains Neutral
UBS maintained a Neutral rating on Meritor (NYSE: MTOR), and cut the price target to $12.00 (from $15.00), following the company's 4Q earnings report. MTOR traded down despite a strong 4Q beat. EPS was reported at $0.39, beating the Street's $0.30. The beat was driven by strong aftermarket margins and lower taxes.
Analyst Colin Langan commented, "MTOR is traded down ~1% (up to 10% down at one point) following a solid Q4 beat ($0.39 vs. Street's $0.30) driven by strong aftermarket margins and lower taxes. The company guided to slightly lower to flat sales in FY16 due to currency headwinds and softening NA Class 8 market, offset by $175m in new business. Adj. EBITDA margins are expected to increase 50bps to 10.0% in FY16 driven by new business and continued cost savings. At the mid-point of their outlook, MTOR now sees next year NA Class 8 volumes falling ~14%, slight ~4% growth in Western Europe truck production, flat China revenue, and a continuing 16% decline in Brazil. We are surprised by the negative market reaction given the number of suppliers that have lowered guidance on weak production forecasts."
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Shares of Meritor closed at $10.60 yesterday.