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Tenneco (TEN) Down 7.2% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Tenneco (TEN). Shares have lost about 7.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Tenneco due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Tenneco Q4 Earnings & Sales Top Estimates

Tenneco reported adjusted earnings of $1.68 per share for fourth-quarter 2020, surpassing the Zacks Consensus Estimate of $1.02 and improving from the year-ago figure of 28 cents.

Revenues of $4,650 topped the Zacks Consensus Estimate of $4,321 million and increased 12.2% year over year. Adjusted EBITDA for the December-end quarter came in at $410 million, surging 42.8% from the comparable year-ago period driven by strong operating performance, and enhanced contribution from structural and temporary cost savings.

Segmental Highlights

For the October-December period, the Clean Air division’s revenues summed $2,117 million, higher than the year-ago figure of $1,743 million.  Adjusted EBITDA totaled $160 million for the quarter, up from the year-ago quarter’s $142 million.

For the fourth quarter, revenues in the Ride Performance division came in at $683 million, increasing from $641 million recorded in the year-earlier period. Adjusted EBITDA totaled $29 million in the December-end quarter, declining from $34 million witnessed in the prior-year quarter.

The Powertrain division’s revenues amounted to $1,120 million for fourth-quarter 2020, rising 10% year over year. Adjusted EBITDA came in at $152 million for the reported quarter, up from the year-ago quarter’s $82 million.

The Motorparts division’s revenues came in at $730 million, down from $741 million generated in fourth-quarter 2019. Adjusted EBITDA totaled $110 million for the quarter under review, up from $76 million generated in the corresponding period of 2019.

Financial Position

Tenneco had cash and cash equivalents of $798 million as of Dec 31, 2020 compared with $564 million in the corresponding period of 2019. Long-term debt totaled $5,171 million, down from $5,371 million as of Dec 31, 2019. During the fourth quarter, the company’s net cash provided by operating activities was $474 million compared with the year-earlier quarter’s $380 million.

Guidance

Tenneco expects 2021 adjusted EBITDA in the band of $1.3-$1.4 billion, implying an uptick from $1,045 million registered in 2020. Full-year revenues are envisioned within $17.2-$17.8 billion, indicating a year-over-year rise of 13.6% at the midpoint of the guided range. The firm anticipates net debt to decline to $4.2 billion at 2021-end from $4.5 billion recorded as of Dec 31, 2020.

For the first quarter of 2021, Tenneco  expects revenues between $4.45 billion and $4.55 billion. Adjusted EBITDA is forecast in the band of $325-$335 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted 5.25% due to these changes.

VGM Scores

Currently, Tenneco has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Tenneco has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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