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Tenneco (TEN) Down 8% 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 8% 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 catalysts.

Tenneco Q4 Earnings Miss, Revenues Meet Estimates

Tenneco reported fourth-quarter 2018 results, wherein adjusted earnings per share of $1.30 missed the Zacks Consensus Estimate of $1.43. Also, the company’s bottom line declined from the prior-year quarter figure of $1.75.
In the reported quarter, Tenneco’s adjusted net income was $105 million compared with $91 million in fourth-quarter 2017.

Quarterly revenues rose 79% year over year to $4.3 billion, almost in line with the Zacks Consensus Estimate. This year-over-year rise was driven by the completion of the acquisition of Federal-Mogul LLC on Oct 1, 2018. On a constant-currency basis and excluding the impact of the acquisition, total revenues were up 4% while value-added revenues increased appreciably to $3.6 billion.

Adjusted EBIT (earnings before interest, taxes and non-controlling interests) was $399 million compared with $225 million recorded in the prior-year quarter. Adjusted EBIT results were driven by the completion of the Federal-Mogul acquisition.

2018 Results

Tenneco reported adjusted earnings per share of $6.28 in 2018, down from the 2017 figure of $6.71.

The company reported revenues of $11.8 billion in the year, up from the 2017 figure of $9.3 billion.




Segmental Results

The Clean Air division’s fourth-quarter revenues were $1.7 billion compared with the year-earlier figure of $1.6 billion.

Revenues in the Ride Performance division were $469 million compared with $480 million recorded in the year-ago quarter.

The Aftermarket division’s revenues were $268 million, down from $282 million generated in fourth-quarter 2017.

Financial Position

Tenneco had cash and cash equivalents of $697 million as of Dec 31, 2018, up from $315 million as of Dec 31, 2017. Long-term debt was $5.3 billion as of Dec 31, 2018, compared with $1.36 billion as of Dec 31, 2017.

2019 Outlook

For 2019, the company expects revenues of $18.2-$18.4 billion. On a pro forma basis, it expects revenue growth rate to be 4-5% in constant dollars.

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 -16.31% due to these changes.

VGM Scores

Currently, Tenneco has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. 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 B. 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 this revision indicates a downward shift. It's no surprise Tenneco has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.



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