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Meritor (MTOR) Inks Pact With ConMet on Zero-Emission Trailers

Meritor, Inc. MTOR has recently signed a collaborative agreement with ConMet, per which, Meritor will manufacture purpose-built trailer suspensions and brakes, and tire inflation systems to work with ConMet's PreSet PluseHub.

The trailblazing system will allow the production of zero-emission refrigerated trailers. In order to deliver a wholesome electrified trailer solution, Meritor is redesigning its trailer suspension and drum brake, keeping in mind the compatibility aspect with ConMet's eHub. The companies will jointly evaluate the application of advanced technologies that cater to the evolving e-mobility market trends.

This partnership is testimony to the eOptimized products solution by Meritor and its dedicated efforts to bring zero-emission solutions to the commercial vehicle industry.

Notably, Meritor is to be acquired by Cummins CMI by 2022 end. The deal, which comes at a time when the demand for climate-friendly transport is on the rise, will reinforce Cummins’ electric and hybrid vehicle parts offerings. It has a purchase price of $3.7 billion, out of which Cummins will pay $2.58 billion in cash. Per the agreement, the company will pay $36.50 per share in a combination of cash and debt to Meritor. The valuation price is at a premium of 48% above MTOR’s closing price on Feb 18, 2022.

The most vital aspect of the buyout is its address to mitigating climate concerns. It harps on the pressing need to incorporate de-carbonized solutions into product offerings to reduce environmental impact. Meritor’s market reputation will empower Cummins to be a provider of integrated powertrain solutions across combustion and electric power applications. By aiding Meritor’s investment in electrification and integrating development within its New Power business, Cummins seeks to offer market-leading solutions.

In its last-quarter earnings call, Meritor’s guidance has remained the same for fiscal 2022. Sales are projected in the range of $4.1-$4.3 billion. The company projects adjusted earnings per share to be in the band of $3.25-$3.75. Cash flow from operations is anticipated in the range of $275-$320 million and free cash flow in the band of $175-$200 million.

Shares of MTOR have gained 17.2% over the past year against its industry’s 47.7% decline.


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Zacks Rank & Key Picks

Currently, MTOR has a Zacks Rank #4 (Sell).    

Better-ranked players in the auto space include Tesla TSLA and Harley-Davidson HOG, both sporting a Zacks Rank #1 currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tesla has an expected earnings growth rate of 40.7% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised around 20.5% upward in the past 60 days.

Tesla’s earnings beat the Zacks Consensus Estimate in all of the trailing four quarters. TSLA pulled off a trailing four-quarter earnings surprise of 33.26%, on average. The stock has also rallied 48.9% over a year.

Harley-Davidson has an expected earnings growth rate of 1.9% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised around 21.7% upward in the past 60 days.

Harley-Davison’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters. HOG pulled off a trailing four-quarter earnings surprise of 77.59%, on average. The stock has rallied 5.7% over a year.


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