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Tenneco Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Predictions

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Tenneco Inc. (NYSE:TEN) defied analyst predictions to release its first-quarter results, which were ahead of market expectations. The company beat both earnings and revenue forecasts, with revenue of US$4.7b, some 7.1% above estimates, and statutory earnings per share (EPS) coming in at US$0.79, 37% ahead of expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

Check out our latest analysis for Tenneco

earnings-and-revenue-growth
earnings-and-revenue-growth

After the latest results, the eight analysts covering Tenneco are now predicting revenues of US$18.0b in 2021. If met, this would reflect a solid 11% improvement in sales compared to the last 12 months. Tenneco is also expected to turn profitable, with statutory earnings of US$2.64 per share. Before this earnings report, the analysts had been forecasting revenues of US$17.5b and earnings per share (EPS) of US$2.77 in 2021. Overall it looks as though the analysts were a bit mixed on the latest results. Although there was a a solid to revenue, the consensus also made a minor downgrade to its earnings per share forecasts.

The consensus price target was unchanged at US$14.75, suggesting the business is performing roughly in line with expectations, despite some adjustments to profit and revenue forecasts. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Tenneco, with the most bullish analyst valuing it at US$31.00 and the most bearish at US$5.00 per share. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. The period to the end of 2021 brings more of the same, according to the analysts, with revenue forecast to display 15% growth on an annualised basis. That is in line with its 17% annual growth over the past five years. Juxtapose this against our data, which suggests that other companies (with analyst coverage) in the industry are forecast to see their revenues grow 12% per year. So although Tenneco is expected to maintain its revenue growth rate, it's only growing at about the rate of the wider industry.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. They also upgraded their revenue forecasts, although the latest estimates suggest that Tenneco will grow in line with the overall industry. The consensus price target held steady at US$14.75, with the latest estimates not enough to have an impact on their price targets.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Tenneco analysts - going out to 2025, and you can see them free on our platform here.

You can also see whether Tenneco is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.