Why Meritor Shares Popped More Than 10% on Wednesday

By Markets Fool.com

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What: Shares of commercial vehicles parts supplier Meritor climbed as much as 13% today after the company's quarterly results and outlook topped Wall Street estimates. at 2:35 p.m., the stock was up 7.7%.

So what: Meritor shares have been volatile over the past year on concerns surrounding its highly levered balance sheet, but today's Q3 results -- adjusted EPS of $0.41 beat estimates by $0.07 -- coupled with upbeat guidance are easing some of those worries. While revenue dropped 7% over the year-ago period to $909 million, adjusted operating margins jumped 120 basis points, reigniting confidence among investors that management's "M2016" strategy to reduce debt while boosting efficiency is on the right track.

Now what: Management now sees full-year earnings of $1.40-$1.50 per share on revenue of $3.50 million to $3.55 billion, versus the consensus of $1.38 and $3.52 billion, respectively. "We believe our performance in fiscal year 2015 demonstrates our commitment to meet or exceed our financial objectives," said CEO and President Jay Craig. "We're confident that execution of our M2016 strategy positions us well to continue generating enhanced shareholder value." With the stock still off more than 10% from its 52-week highs and trading at a cheapish forward P/E of 9, there might even be more room to buy into that bullishness.

The article Why Meritor Shares Popped More Than 10% on Wednesday originally appeared on Fool.com.

Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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