MTOR

Meritor Inc

Industrial/Transportation


Presented:04/24/2017
Price:$17.36
Cap:$1.54B
Current Price:$36.50
Cap:$2.59B

Presented

Date04/24/2017
Price$17.36
Market Cap$1.54B
Ent Value$1.99B
P/E Ratio2.86x
Book ValueN/A
Div Yield0%
Shares O/S88.50M
Ave Daily Vol1,014,156
Short Int9.45%

Current

Price$36.50
Market Cap$2.59B
Meritor, Inc. engages in the design, production, and trade of modules and components to original equipment manufacturers. Its products include axle, brake, and suspension solutions. The company was founded on July 7, 2000 and is headquartered in Troy, MI.

Publicly traded companies mentioned herein: Dana Inc (DAN), Meritor Inc (MTOR), PACCAR Inc (PCAR), Westinghouse Air Brake Technologies Corp (WAB)

Highlights

The presenter is long shares of Meritor (MTOR), a small cap ($1.6B) supplier of drivetrain systems and components (including axles, drivelines, and braking and suspension) to Class 8 truck OEMs. While the story hasn’t changed much in ten years (it is the same business as it was), the Class 8 truck cycle is reliable and at $17-18, the stock is extremely cheap. Also, there are two noteworthy differences between Meritor today and the company it was years ago. First, MTOR is focused on the Class 8 truck market (it completed the sale of its light vehicle business in 2011, but the presenter thinks investors still view it as exposed to autos). Second, the company’s other post-employment benefits (OPEB) liability could go to zero, eliminating $400mm of pre-tax liabilities. If his view on the cycle and model prove to be accurate, MTOR could earn $3 per share in 2019 (85-90 cents ahead of the Street) and the stock could double (assuming a 12x multiple on future earnings at some point in the next 12-24 months).

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Idea Discussion

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