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Tenneco (TEN) Down 7.3% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Tenneco (TEN). Shares have lost about 7.3% 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 the most recent earnings report in order to get a better handle on the important drivers.

Tenneco Tops Q2 Earnings Estimates, Lowers 2019 View

Tenneco reported second-quarter 2019 results, wherein adjusted earnings per share of $1.20 beat the Zacks Consensus Estimate of 93 cents. In the prior-year quarter, the company’s bottom line was $1.84.

In the reported quarter, Tenneco’s adjusted net income was $97 million compared with $96 million in second-quarter 2018.

Its quarterly revenues rose 78% year over year to $4.5 billion. Also, the company’s revenues surpassed the Zacks Consensus Estimate by 1.1%. On a constant-currency basis, revenues rose 1% from the last year. Light-vehicle industry production declined 8% in the reported quarter.

Adjusted EBITDA (income before interest expenses, income taxes, non-controlling interests and depreciation, and amortization) was $414 million compared with $233 million recorded in the prior-year quarter.

Segmental Results

The Clean Air division’s second-quarter revenues were $1.83 billion compared with the year-earlier figure of $1.69 billion.

Revenues in the Ride Performance division were $709 million compared with $506 million recorded in the year-ago quarter.

The Powertrain division’s second-quarter revenues were $1.13 billion.

The Motorparts division’s revenues were $835 million, up from $333 million generated in second-quarter 2018.

Financial Position

Tenneco had cash and cash equivalents of $384 million as of Jun 30, 2019, down from $697 million as of Dec 31, 2018. Long-term debt was $5.51 billion as of Jun 30, 2019, compared with $5.34 billion as of Dec 31, 2018.

Outlook

For the third quarter of 2019, the company expects revenues to be $4.3-$4.4 billion. Further, adjusted EBITDA is projected to be $390-$410 million.

Tenneco revised its guidance for 2019. It expects revenues to be $17.6-$17.8 billion compared with $17.7-$18.1 billion stated earlier.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -5.53% due to these changes.

VGM Scores

Currently, Tenneco has an average Growth Score of C, a grade with the same score on the momentum front. However, 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 indicates a downward shift. 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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