Why Meritor's Shares Jumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of auto industry supplier Meritor jumped as much as 10% today after the company announced earnings and the completion of an asset sale.

So what: Fiscal-third-quarter revenue fell 11% to $993 million and fell short of the $1.02 billion expectation from Wall Street. But adjusted earnings per share of $0.34 easily beat the $0.19 estimate, and that's what traders focused on today. The company also completed a $195 million sale of a Brazilian joint venture.

Now what: Revenue clearly isn't headed in the right direction but investors are excited about the bottom-line beat. Let's keep in mind that adjusted earnings per share are also down year over year, so even the bottom line isn't headed in the right direction. I'd like to see both revenue and earnings trend in a positive direction before jumping in because just beating Wall Street's best guess at earnings doesn't mean that the business is in good shape right now.

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The article Why Meritor's Shares Jumped originally appeared on Fool.com.

Fool contributor Travis Hoium 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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