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Tenneco's (TEN) Q2 Earnings Lag Estimates, Revenues In Line

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Tenneco's (TEN) Q2 Earnings Lag Estimates, Revenues In Line

Growth in Tenneco's (TEN) Clean Air, Ride Performance and Aftermarket divisions help it witness year-over-year revenue growth in Q2.

Tenneco Inc. TEN reported second-quarter 2018 results wherein adjusted earnings per share of $1.92 missed the Zacks Consensus Estimate of $2. However, the company’s bottom line improved from the prior-year quarter’s figure of $1.88.

Tenneco’s adjusted net income in the reported quarter was $99 million compared with $101 million in second-quarter 2017.

Quarterly revenues rose 9% year over year to $2.54 billion, almost in line with the Zacks Consensus Estimate. The year-over-year rise was driven by revenue growth across Clean Air, Ride Performance and Aftermarket divisions. On a constant-currency basis, total revenues rose 8% while value-added revenues increased 6% to $1.89 billion.

Tenneco Inc. Price, Consensus and EPS Surprise

Tenneco Inc. Price, Consensus and EPS Surprise | Tenneco Inc. Quote

Adjusted EBIT (earnings before interest, taxes and non-controlling interests) was $175 million compared with $178 million recorded prior-year quarter. The adjusted EBIT results were impacted by rise in volume across commercial trucks, light vehicles and off-highway products, offset by costs related to steel and the launch of a major truck platform.

Segmental Results

Revenues from the Clean Air division increased 5% to $1.69 billion during the quarter under review. Adjusted EBIT rose to $122 million from $118 million in the prior-year quarter.

Revenues from the Ride Performance division rose 13% to $506 million. Adjusted EBIT declined to $23 million compared with $27 million recorded in the year-ago quarter.

Revenues from the Aftermarket division gained 1% to $337 million. However, adjusted EBIT decreased to $53 million compared with $55 million recorded in the year-ago quarter.

Financial Position

Tenneco had cash and cash equivalents of $235 million as of Jun 30, 2018, down from $315 million as of Dec 31, 2017. Long-term debt was $1.38 billion as of Jun 30, 2018, compared with $1.36 billion as of Dec 31, 2017.

Outlook

For third-quarter 2018, the company expects total revenues to grow 5% on a constant-currency basis. Considering the currency impacts, the estimated revenues are pegged at negative 2%, based on currency exchange rates as of Jun 30, 2018. Further, the company projects organic growth to outperform the industry’s growth. It will be driven by commercial-truck, light-vehicle and off-highway revenues along with a steady contribution from the global aftermarket segment.

For 2018, Tenneco reaffirmed its anticipated 5% organic revenue growth, outpacing the industry production by 3 percentage points. Moreover, based on currency exchange rates as of Jun 30, 2018, the company expects the currency to have 1% positive impact on revenues.

Zacks Rank & Key Picks

Tenneco currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the auto space are Fox Factory Holding Corporation FOXF, AB Volvo VLVLY and Oshkosh Corporation OSK, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Fox Factory has an expected long-term growth rate of 15.8%. Over a year, shares of the company have gained 27.9%.

Volvo has an expected long-term growth rate of 15%. Over a year, shares of the company have gained 2.4%.

Oshkosh has an expected long-term growth rate of 18.3%. Shares of the company have risen 9.3% in the past year.

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