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Monro Muffler Brake (MNRO): Helping Cars Run, But Can It Do the Same for Portfolios?

Monro Muffler Brake (MNRO) is a provider of automobile and repair services, including brakes, mufflers and exhaust systems, and steering, drive train, suspension, and wheel alignments. As of March 29, 2008, it operated 720 company-owned and 14 dealer-operated stores in New York, Pennsylvania, Ohio, Connecticut, Massachusetts, West Virginia, Virginia, Maryland, Vermont, New Hampshire, New Jersey, North Carolina, South Carolina, Indiana, Rhode Island, Delaware, and Maine under the Monro Muffler Brake & Service, Tread Quarters Discount Tire, and Mr. Tire names.

Companies such as Monro stand to benefit from slumping auto sales, especially those of US-based car makers. Chrysler, Ford and General Motors all recently reported sharply lower sales for September, as did Japanese manufacturer Toyota. The decrease in new car sales leads to an increase in older cars on the road that need to be maintained. While Monro has been affected by rising commodity prices within the last year, it has been able to pass some of those costs on to consumers, allowing the company to maintain strong margins.

In July, New York-based Monro estimated second-quarter earnings between 36 cents and 38 cents per share. That beat analysts’ estimates of 32 cents a share. The company also upped its full-year guidance to $1.10-$1.18 a share from $1.08 to $1.18 a share. Seven Wall Street analysts track Monro, though none have issued a new rating recently. Monro has used acquisitions, including nine in the past six years, to bolster its bottom line and gain market share. The company has left the door open to more acquisitions in the future.

Monro’s primary competitors include Midas Inc., Pep Boys, O’Reilly Automotive and the privately held Meineke Car Care Centers. Of note to investors: institutional support of Monro is strong, with 94 institutions owning 92 percent of Monro’s shares. Mutual fund owners include Fidelity, Lord Abbett and Vanguard. Monro’s shares closed at $20.26 on Friday and have traded between $14.70 and $26.20 over the past year. The company has a market value of $375 million.

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