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Tenneco (TEN) Q1 Earnings Beat Estimates, '16 View Raised

Tenneco Inc. TEN reported adjusted earnings per share of $1.17 in the first quarter of 2016 that surpassed the Zacks Consensus Estimate of $1.11. Moreover, earnings per share increased 33% from 88 cents recorded in the first quarter of 2015. Also, adjusted net income jumped 24% to $67 million from $54 million a year ago.
 

 

On a reported basis, Tenneco’s net income came in at $57 million or 99 cents per share, compared with $49 million or 80 cents per share in the year-ago quarter.

Revenues increased 6% year over year to $2.14 billion, surpassing the Zacks Consensus Estimate of $2.08 billion. Excluding currency effects, revenues rose 9% to $2.21 billion.

Global aftermarket revenues improved 8% on the back of higher sales in North and South America as well as Europe. Commercial truck and off-highway revenue inched up 1%. Light vehicle revenue rose 11%, driven by better performance in North America, Europe, China and India.

Adjusted EBIT (earnings before interest, taxes and non-controlling interests) increased 10% to $138 million from $125 million a year ago. Improvement in EBIT was driven by strong light vehicle volumes, commercial truck and off-highway clean air content growth, higher global aftermarket sales and operational cost improvements. Adjusted EBIT margin improved to 6.5% from 6.2% a year ago.

Segment Results

Revenues from the Clean Air division rose 7.8% to $1.52 billion from $1.41 billion a year ago. Adjusted EBIT increased to $111 million from $93 million in the prior-year quarter.

Revenues from the Ride Performance division went up to $621 million from $618 million a year ago. Adjusted EBIT increased to $63 million from $56 million in the year-ago quarter.

Financial Position

Tenneco had cash and cash equivalents of $374 million as of Mar 31, 2016, up from $287 million as of Dec 31, 2015. Total debt was $1.41 billion as of Mar 31, 2016, compared with $1.21 billion as of Dec 31, 2015.

In the first quarter of 2016, cash used for operating activities was $29 million, compared with $50 million in the first quarter of 2015. Capital expenditures for the period totaled $68 million compared with $77 million a year ago.

Share Repurchase

In the first quarter of 2016, the company bought back 360,000 shares for $16 million. As of the end of the quarter, the company had $321 million left under its share repurchase program. Tenneco expects to fully utilize this share repurchase program by the end of 2017.

Outlook

Total revenue, excluding currency effects, is expected to improve about 6% in the second quarter of 2016 based on stronger global light vehicle volumes, driven by new launches and the ramp-up of recently launched platforms, along with solid contribution from the global aftermarket.  

The aggregate industry production is projected to improve 4% in the second quarter, backed by a 4% increase in light vehicle industry production, partially offset by a 1% decline in combined commercial truck and off-highway industry production.

Tenneco raised its outlook for 2016. The company expects total revenue growth of about 6%, excluding currency effects, up from the previous forecast of 5% improvement. The company expects that it will exceed global industry production by 3%.

Tenneco further expects that it will record better performance both in 2017 and 2018 due to new light vehicle emissions regulations that will take effect in North America and Europe. The company also expects to record better margins, aided by higher volumes and operational improvement initiatives undertaken.

Tenneco anticipates annual revenue growth of 6%–8% in 2017 and 7%–9% in 2018.

Zacks Rank

Tenneco currently carries a Zacks Rank #2 (Buy).

Some other favorably ranked automobile stocks include Lear Corp. LEA, Federal-Mogul Holdings Corporation FDML and Superior Industries International, Inc. SUP. All three stocks sport a Zacks Rank #1 (Strong Buy).

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TENNECO INC (TEN): Free Stock Analysis Report
 
SUPERIOR INDS (SUP): Free Stock Analysis Report
 
LEAR CORPORATN (LEA): Free Stock Analysis Report
 
FEDERAL MOGUL-A (FDML): Free Stock Analysis Report
 
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