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Tenneco (TEN) Completes Ohlins Acquisition, Boosts Portfolio

Zacks Equity Research

Tenneco Inc. TEN has reported the closing of the Ohlins Racing A.B. (“Ohlins”) acquisition. Ohlins, a Sweden-based company, offers suspension systems and components to automotive, and motorsport industries.

Ohlins will be part of Tenneco’s new spin-off company, consisting the aftermarket & ride performance business. Ohlins’ solid reputation and advanced technology will strengthen the new company’s OE and aftermarket portfolio, and boost its market position.

In November 2018, Tenneco inked a deal to acquire Ohlins. The acquisition marks the beginning of the separation of Tenneco into two independent publicly traded companies. After the separation, the new Tenneco company will consist of the existing powertrain and clean air technology unit while the spin-off company will comprise the aftermarket & ride performance business.

Tenneco Inc. Price and Consensus

 

Tenneco Inc. Price and Consensus | Tenneco Inc. Quote

After the acquisition of Federal-Mogul in October 2018, Tenneco finalized the decision of splitting its and Federal-Mogul’s businesses into two separate entities. The strategy behind the decision to split is to focus more on individual businesses and benefit from synergies. The spin-off is projected to complete by the second half of 2019. The two individual entities are expected to be industry leaders in their respective markets and enjoy financial flexibility.

Currently, Tenneco operates through three segments — Clean Air, Ride Performance and Aftermarket. In third-quarter 2018, the company’s total revenues rose 4% year over year to $2.4 billion, with growth in the clean air and ride performance segments. The rise in revenues was driven by new business wins, robust commercial truck and off-highway volumes along with incremental content on light vehicles.

Robust organic growth in commercial truck and highway businesses, along with the acquisition of Federal-Mogul, encouraged Tenneco to raise its revenue guidance for 2018. For 2018, the company expects revenues of roughly $11.8 billion and value-add adjusted EBITDA margin of 11.3-11.5%.

Price Performance

Over the past month, shares of Tenneco have gained 8% compared with the industry’s increase of 6.4%.

 



Zacks Rank & Stocks to Consider

Tenneco currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader auto sector are Bridgestone Corporation BRDCY, Genuine Parts Company GPC and Cooper Tire & Rubber Company CTB, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Bridgestone has an expected long-term growth rate of 4.7%. Share price of the company has increased 5.1% in the past three months.

Genuine Parts has an expected long-term growth rate of 5%. Over the past three months, shares of the company have gained 2.4%.

Cooper Tire has an expected long-term growth rate of 4%. Shares of the company have gained 6.5% in the past month.

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