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Tenneco (TEN) Q1 Earnings Miss Estimates, Revenues Surpass

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Tenneco Inc. (TEN) reported first-quarter 2018 results wherein adjusted earnings per share of $1.58 missed the Zacks Consensus Estimate of $1.69. However, the company’s bottom line improved from the prior-year quarter’s figure of $1.46.

Tenneco’s adjusted net income in the reported quarter was $81 million compared with $79 million in first-quarter 2017.

Quarterly revenues rose 12% year over year to $2.57 billion, beating the Zacks Consensus Estimate of $2.43 billion. The rise was primarily driven by double-digit revenue growth across Clean Air and Ride Performance divisions. On a constant-currency basis, total revenues rose 6% while value-added revenues increased 4% to $1.82 billion compared with a decline of 1% in the industry production.

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 $147 million, similar to the prior-year quarter. The adjusted EBIT results indicate rise in volume across commercial trucks, light vehicles, off-highway products and strong Clean Air incremental margins.

In addition to the existing two segments, Tenneco reported quarterly results under an additional segment, Aftermarket.

Segment Results

Revenues from the Clean Air division increased 13% to $1.76 billion during the quarter under review. Adjusted EBIT rose to $120 million from $103 million in the prior-year quarter.

Revenues from the Ride Performance division rose 20% to $513 million. Adjusted EBIT increased to $22 million compared with $30 million recorded in the year-ago quarter.

Revenues from the Aftermarket division declined 1% to $305 million. Adjusted EBIT decreased to $37 million compared with $44 million recorded in the year-ago quarter.

Financial Position

Tenneco had cash and cash equivalents of $288 million as of Mar 31, 2018, up from $315 million as of Dec 31, 2017. Long-term debt was $1.42 billion as of Mar 31, 2018, compared with $1.36 billion as of Dec 31, 2017.

Outlook

For second-quarter 2018, the company expects total revenues to improve about 8% year over year, against the prior expectation of 3% on a constant-currency basis. Further, the company projects organic growth to outperform the industry’s growth. Its growth will be driven by a double-digit increase in commercial truck and off-highway revenues, higher light-vehicle sales and a steady contribution from the aftermarket segment.

For 2018, Tenneco reaffirmed its anticipated 5% organic revenue growth, outpacing the industry production by 3 percentage points.

Zacks Rank & Stocks to Consider

Tenneco carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the auto space are Bridgestone Corporation BRDCY, BorgWarner Inc. BWA and Dana Incorporated DAN. While Bridgestone and BorgWarner carry Zacks Rank #2 (Buy), Dana sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Bridgestone has expected long-term growth rate of 4.5%. Its stock has seen the Zacks Consensus Estimate for annual earnings being revised 3.6% upward over the last 30 days.

Dana has expected long-term growth rate of 10%. Its stock has seen the Zacks Consensus Estimate for annual earnings being revised 2.4% upward over the last 30 days.

BorgWarner has expected long-term growth rate of 8.6%. Its stock has seen the Zacks Consensus Estimate for annual earnings being revised 0.5% upward over the last seven days.

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