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Tenneco Inc. designs, manufactures, and sells emission control and ride control products and systems for light, commercial, and specialty vehicle applications worldwide. The company offers emission control systems, such as catalytic converters and diesel oxidation catalysts to reduce harmful gaseous emissions; diesel particulate filters to eliminate particulate matter emitted from diesel engines; burner systems, which combust fuel and air inside the exhaust system; and hydrocarbon vaporizers and injectors. Tenneco Inc. was founded in 1987 and is headquartered in Lake Forest, Illinois.
TEN Meets or Beats Expectations in Three of Last Four Quarters
Tenneco has met or topped the Zacks Consensus Estimate three of the last four quarters. Over the course of the last four reports, met earnings estimates in the September 2011 quarter and then missed in the December 2011 quarter. The company beat the Zacks Consensus Estimate in the two previous quarters which included a 31% earnings beat in the March 2011 quarter. As a result of the big beat, the stock traded off by nearly 5% the next day.
The September 2011 quarter saw earnings of $0.67, in line with the Zacks Consensus Estimate. Revenue for the quarter was $1.77 billion which was approximately $43 million less than expectations. The stock traded lower by more than 10% the following day.
Tenneco Recently Reported Earnings
On February 2, 2012 the company reported revenue of $1.78 billion roughly $68 million less than the Zacks Consensus Estimate and higher than the $1.57 billion reported in the year ago period. EPS of $0.52 was $0.06 lower than estimates or a miss of 10%. Following the report, the stock moved higher by 14%.
Earnings Estimates Bumped Up
Following the most recent earnings report, analysts bumped up their earnings estimates for 2012. The Zacks Consensus Estimate for 2012 EPS moved from $3.39 in February 2012 to the current level of $3.44. The 2013 estimate spiked higher following the recent earnings release, moving from $4.30 in February to the current level of $4.36.
Tenneco valuation is very low and compares quite favorably to the industry average. The trailing twelve months PE multiple of 14x is higher than the 12x industry average, but not by much. The forward PE of 10.6x has TEN trading at a discount to the industry average of 10.9x. The price to book is a higher than the 1.8x industry average. The price to sales multiple of 0.3x is below the 0.5x industry average to round out the metrics that aggressive growth investors usually look at.
When we look at the price and consensus chart for Tenneco, we see a stock that has had some near term volatility. The run in early 2011 sent the stock well above the estimate line implying the stock was overvalued. As future estimates came out for 2012 and 2013, the higher levels of earnings served to increase the stock price bringing the stock to more reasonable valuations. The Tenneco valuation is very reasonable due to the mature industry, but the growth in earnings and its consistency in meeting or beating the number is why the stock is a Zacks #1 Rank (Strong Buy).
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