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Tenneco's (TEN) Q3 Earnings & Revenues Drive Past Estimates

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Tenneco's (TEN) Q3 Earnings & Revenues Drive Past Estimates

Increased volumes of commercial truck and off-highway drive Tenneco's (TEN) third-quarter 2018 earnings.

Tenneco Inc. TEN reported third-quarter 2018 results, wherein adjusted earnings per share of $1.70 surpassed the Zacks Consensus Estimate of $1.50. Also, the company’s bottom line improved from the prior-year quarter’s figure of $1.67.

In the reported quarter, Tenneco’s adjusted net income of $88 million remained flat year over year.

Quarterly revenues rose 4% year over year to $2.4 billion, beating the Zacks Consensus Estimate of $2.3 billion. The year-over-year rise was driven by revenue growth across the Clean Air and Ride Performance divisions. This upside stemmed from increased volumes of commercial truck and off-highway, along with new business and incremental content on light vehicles. On a constant-currency basis, total revenues were up 7%, while value-added revenues increased 5% to $1.8 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 $149 million compared with $154 million recorded in the prior-year quarter. The adjusted EBIT results were impacted by rise in volume across commercial trucks and off-highway products, offset by costs related to steel and currency exchange rates.

Segmental Results

The Clean Air division’s third-quarter revenues were $1.6 billion compared with the year-earlier figure of $1.5 billion.

Revenues in the Ride Performance division were $461 million compared with $457 million recorded in the year-ago quarter.

The Aftermarket division’s revenues came in at $309 million, down from $322 million generated in third-quarter 2017.

Financial Position

Tenneco had cash and cash equivalents of $202 million as of Sep 30, 2018, down from $315 million as of Dec 31, 2017. Long-term debt was $1.3 billion as of Sep 30, 2018, compared with $1.36 billion as of Dec 31, 2017.

Outlook

For fourth-quarter 2018, the company expects organic revenues to grow 3% on a constant-currency basis. The company expects currency to have a negative impact of 3% on revenues as of Sep 30, 2018. Also, the acquisition of Federal-Mogul is anticipated to be conducive to the company’s top line by $1.9 billion.

For 2018, Tenneco raised its organic revenue growth guidance to 6%, outpacing the industry production by 5 percentage points. The company expects revenues of approximately $11.8 billion in 2018, driven by strong organic growth and Federal-Mogul acquisition. Moreover, value-add adjusted EBITDA margin is expected to be 11.3-11.5%.

Additional News

The company announced closing of its original equipment (OE) ride control plants situated in Owen Sound, Ontario, and Hartwell, GA. The decision has been taken to improve its operational efficiency and remain in sync with the changing market conditions. Later this year, Tenneco will initiate shifting the existing customer business of these projects to its ride control facility in Kettering, OH.

Earlier on Oct 1, 2018, Tenneco concluded the acquisition of Federal-Mogul LLC, a global provider to original equipment manufacturers and the aftermarket.

Zacks Rank and Stocks to Consider

Tenneco currently carries a Zacks Rank #4 (Sell).

A few better-ranked stocks in the auto space are Allison Transmission Holdings, Inc. ALSN, CarMax, Inc. KMX and Advance Auto Parts, Inc. AAP. Allison Transmission sports a Zacks Rank #1 (Strong Buy), while CarMax and Advance Auto carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Allison Transmission has an expected long-term growth rate of 10%. Over the past six months, shares of the company have moved up 12.7%.

CarMax has an expected long-term growth rate of 3.3%. Over the past six months, shares of the company have moved up 12.1%.

Advance Auto has an expected long-term growth rate of 12.3%. Shares of the company have risen 43.8% over the past six months.

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