U.S. Markets closed

Tenneco Q1 Earnings Beat Estimates, Up Y/Y

Zacks Equity Research

Tenneco Inc. (TEN) reported adjusted earnings per share of 91 cents in the first quarter of 2014, which beat the Zacks Consensus Estimate by 5 cents. Earnings per share improved 26.4% year over year from 72 cents in the first quarter of 2013.

Adjusted net income increased 27.3% to $56 million from $44 million a year ago. On a reported basis, Tenneco’s net income came in at $46 million or 75 cents per share compared with $54 million or 88 cents in the year-ago quarter. The reported net income includes restructuring expenses in both quarters and tax benefits in 2013.

Revenues increased 10% year on year to $2.09 billion, marginally beating the Zacks Consensus Estimate of $2.07 billion. The improvement was attributable to higher revenues from both segments. Revenues also benefited from a 9% hike in light vehicle OE revenues, a 30% increase in commercial truck and off-highway OE revenues, and a 2% improvement in global aftermarket revenues.

Adjusted EBIT (earnings before interest, taxes and non-controlling interests) grew 26.8% to $123 million from $97 million a year ago. Adjusted EBIT benefited from a 19% increase in adjusted EBIT from Clean Air Division and a 38% improvement in adjusted EBIT from Ride Performance Division.

Adjusted EBIT margin improved to 7.6% from 6.7% year ago. The margin improvement was driven by higher light and commercial vehicle volumes, new platforms, increase in commercial vehicle content, higher Ride Performance aftermarket sales, and better operational performance.

Segment Results

Revenues from Clean Air Division improved 11.4% to $1.44 billion from $1.30 billion a year ago. Adjusted EBIT augmented 19.2% to $93 million from $78 million a year ago on higher light vehicle volumes, increased commercial truck and off-highway equipment revenues and ramp up of new light and commercial trucks and off-highway programs in North America, Europe and China.

Revenues from Ride Performance Division rose 7.1% to $650 million from $607 million. Adjusted EBIT grew 37.5% to $55 million from $40 million driven by strong manufacturing performance due to higher light vehicle volumes in North America, Europe and China, increased commercial vehicle revenues in North America and Europe, and higher aftermarket sales in Europe.

Financial Position

Tenneco had cash and cash equivalents of $267 million as of Mar 31, 2014, down from $275 million as of Dec 31, 2013. Total debt stood at $1.32 billion as of Mar 31, 2014 compared with $1.10 billion as of Dec 31, 2013.

For the first quarter of 2014, the company had cash used by operating activities of $140 million, up from $92 million in the year-ago period. Capital expenditures for the period totaled $71 million compared with $59 million in the year-ago quarter. The rise in capital expenditure resulted from the Clean Air programs in China, North America and Europe.


Based on IHS Automotive forecasts, Tenneco expects global light vehicle production to increase 2% in the second quarter of 2014, with a 2% rise in North America, 11% increase in China and 6% growth in India. Light vehicle production is predicted to decline 26% in South America, 3% in Australia and 1% in Europe.

Tenneco expects revenues from commercial truck and off-highway customers in the second quarter to increase 20–30%. The favorable projection takes into account new business and benefits from incremental content launching on current platforms. Tenneco also expects a stable performance from the global aftermarket business, with improvement in North America and Europe.

Tenneco is a leading manufacturer and supplier of emission control and ride control systems for automotive original equipment manufacturers and the aftermarket. Currently, the company retains a Zacks Rank #4 (Sell).

Some better-ranked stocks that are performing well in same industry include Meritor, Inc. (MTOR), Superior Industries International, Inc. (SUP) and Magna International Inc. (MGA). All the stocks sport a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on TEN
Read the Full Research Report on MTOR
Read the Full Research Report on SUP
Read the Full Research Report on MGA

Zacks Investment Research