Financial Contrast: Meritor (MTOR) & Federal-Mogul (FDML)

Meritor (NYSE: MTOR) and Federal-Mogul (NASDAQ:FDML) are both auto/tires/trucks companies, but which is the better stock? We will contrast the two businesses based on the strength of their analyst recommendations, valuation, dividends, risk, profitability, earnings and institutional ownership.

Insider & Institutional Ownership

96.2% of Meritor shares are held by institutional investors. Comparatively, 98.5% of Federal-Mogul shares are held by institutional investors. 2.9% of Meritor shares are held by company insiders. Comparatively, 82.1% of Federal-Mogul shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Profitability

This table compares Meritor and Federal-Mogul’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Meritor 9.68% -1,152.54% 6.52%
Federal-Mogul 0.31% 16.56% 2.17%

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Meritor and Federal-Mogul, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Meritor 0 4 4 0 2.50
Federal-Mogul 0 0 0 0 N/A

Meritor currently has a consensus price target of $26.44, indicating a potential upside of 8.35%. Given Meritor’s higher probable upside, research analysts plainly believe Meritor is more favorable than Federal-Mogul.

Earnings and Valuation

This table compares Meritor and Federal-Mogul’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Meritor $3.35 billion 0.65 $324.00 million $3.55 6.87
Federal-Mogul N/A N/A N/A $0.49 20.37

Meritor has higher revenue and earnings than Federal-Mogul. Meritor is trading at a lower price-to-earnings ratio than Federal-Mogul, indicating that it is currently the more affordable of the two stocks.

Summary

Meritor beats Federal-Mogul on 6 of the 9 factors compared between the two stocks.

About Meritor

Meritor, Inc. is a supplier of a range of integrated systems, modules and components to original equipment manufacturers (OEMs) and the aftermarket for the commercial vehicle, transportation and industrial sectors. The Company’s segments include Commercial Truck & Industrial and Aftermarket & Trailer. The Commercial Truck & Industrial segment supplies drivetrain systems and components, including axles, drivelines and braking and suspension systems, for medium- and heavy-duty trucks, off-highway, military, construction, bus and coach, fire and emergency and other applications in North America, South America, Europe and Asia Pacific. The Commercial Truck & Industrial segment also includes the Company’s aftermarket businesses in Asia Pacific and South America. The Aftermarket & Trailer segment supplies axles, brakes, drivelines, suspension parts and other replacement and remanufactured parts to commercial vehicle aftermarket customers in North America and Europe.

About Federal-Mogul

Federal-Mogul Holdings Corp, formerly Federal-Mogul Corporation, is a global supplier of technology and innovation in vehicle and industrial products for fuel economy, emissions reduction and safety systems. The Company serves original equipment manufacturers (OEM) and servicers (OES) (collectively OE) of automotive, light, medium and heavy-duty commercial vehicles, off-road, agricultural, marine, rail, aerospace, power generation and industrial equipment, as well as the worldwide aftermarket. As of December 31, 2012, the Company had OEM products included on more than 300 global vehicle platforms and more than 700 global powertrains used in light, medium and heavy-duty vehicles. The Company offers brands, OE replacement and premium products for all aftermarket customers.

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