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MTOR – Market expectations are for Uniform ROA to recover, but management may be concerned about EPS guidance, costs, and sales

January 27, 2021

  • Meritor, Inc. (MTOR:USA) currently trades above recent averages relative to UAFRS-based (Uniform) earnings, with a 20.9x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may be concerned about their ability to meet EPS guidance, labor and manufacturing cost optimization, and declining aftermarket sales
  • Specifically, management may lack confidence in their ability to achieve their adjusted EPS and EBITDA margin guidance, and they may be exaggerating the potential of the new Daimler contract. Finally, management may lack confidence in their ability to mitigate aftermarket sales declines, further reduce labor costs, and optimize their manufacturing footprint