Meritor Shares Are Down Despite Strong Financial Guidance

Meritor shares

Meritor Inc. (NYSE:MTOR): Meritor shares are down more than 5% since the start of this year despite robust growth in its financial numbers. The company has generated a 32% revenue growth in the second quarter compared to last year. The revenue growth is driven by higher production rate in all of its major markets.

Meritor’s earnings are also increasing at a significant pace, buoyed by higher revenues. The company generated earnings of $57 million in the second quarter, significantly higher than the $22 million last year. Meritor management expects its full-year revenue to stand in the range of $4 billion, considerably higher than $3.35 billion in fiscal 2017.

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With the revenue tailwinds we expect to continue in the second half, in addition to new business and market share wins, our full year guidance has improved measurably,” said Jay Craig, CEO and president of Meritor.

Meritor shares
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Meritor Shares Are Dipping Despite Solid Financial Performance

The downtrend in MTOR shares is due to the broader market sell-off in the auto sector. Traders and auto companies are of the opinion that the U.S. trade war with China and European countries are likely to hurt the auto sector.

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China imposed 25% tariffs on U.S. auto sales last week as the European Union announced that it is prepared to retaliate in response to U.S. trade tariffs. Donald Trump has recently announced that he is planning to impose taxes on European steel and auto products, including imported cars. In response to Trump’s threat, the European Union is planning to put tariffs on up to $294B worth of U.S. exports.

Besides tariffs on auto products, higher tariffs on steel and other metals are increasing the cost of production of auto products. “If you put that kind of a tariff on a vehicle or an industry, prices are definitely going to go up on average,” said LMC Automotive’s Jeff Schuster.

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