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Tenneco's (TEN) Q3 Earnings Beat Estimates, Revenues Lag
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Tenneco Inc. reported adjusted earnings per share of $1.53 in the third quarter of 2016 that outpaced the Zacks Consensus Estimate of $1.49. Moreover, earnings per share increased 25.4% from $1.22 recorded in the third quarter of 2015. Also, adjusted net income went up 17.8% to $86 million from $73 million a year ago.
On a reported basis, Tenneco’s net income came in at $180 million or $3.21 per share, compared with $52 million or 88 cents per share in the year-ago quarter.
Revenues rose 3.5% year over year to $2.10 billion, but marginally missed the Zacks Consensus Estimate of $2.12 billion. The year-over-year improvement in the top line was aided by strong revenues in global light vehicles, primarily in the Clean Air and Ride Performance lines. Excluding currency effects, revenues rose 5% to $2.1 billion. Revenue growth outpaced global aggregate industry production growth of 5%.
Global aftermarket revenues dropped 2.7% year over year. Commercial truck and off-highway revenue fell 11.1% due to off-highway market decline in North America. Light vehicle revenue rose 7.3%.
Adjusted EBIT (earnings before interest, taxes and non-controlling interests) increased 5.3% to $159 million from $151 million a year ago. The upside was driven by higher light vehicle volumes and the strength of the company’s light vehicle platform position, including the new platform launches as well as operational improvements in China and Europe. Adjusted EBIT margin improved to 7.6% from 7.5% a year ago.
Shares of the company fell almost 1% to $54.66 on Oct 28.
Revenues from the Clean Air division rose 3.5% to $1.46 billion from $1.41 billion a year ago. Adjusted EBIT increased to $113 million from $107 million in the prior-year quarter.
Revenues from the Ride Performance division rose to $636 million from $617 million a year ago. Adjusted EBIT increased to $68 million from $58 million in the year-ago quarter.
Financial Position
Tenneco had cash and cash equivalents of $324 million as of Sep 30, 2016, up from $287 million as of Dec 31, 2015. Long-term debt was $1.31 billion as of Sep 30, 2016, compared with $1.21 billion as of Dec 31, 2015.
In the first nine months of 2016, cash flow from operating activities was $239 million, compared with $188 million in the first nine months of 2015. Capital expenditures for the said period totaled $209 million compared with $218 million a year ago.
Share Repurchase
In third-quarter 2016, the company bought back 1.7 million shares for $89 million. Since announcing the share repurchase program in 2015, Tenneco has repurchased 7 million shares for $359 million, representing 11% of shares outstanding at that time.
Outlook
Total revenue is expected to improve about 3% in the fourth quarter of 2016 based on better production levels. Revenues in the fourth quarter will also benefit from a stronger global aftermarket. Commercial truck revenue is expected to be in line with industry truck production, while off-highway revenue is likely to be negatively impacted by weakness in the European and North American markets.
For 2016, Tenneco continues to anticipate total revenue growth of about 6%. It expects to exceed global industry production by 3%. The company also expects full-year margin to improve year over year. Tenneco further expects that it will record a better performance in both 2017 and 2018.
Some better-ranked stocks in the auto space include Spartan Motors Inc. , Gentex Corp. (GNTX - Free Report) and Standard Motor Products Inc. (SMP - Free Report) .
Spartan Motors, carrying a Zacks Rank #2 (Buy), has a long-term expected growth rate of 15%.
Gentex, also a Zacks Rank #2 stock, has a long-term expected growth rate of 11.17%.
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Tenneco's (TEN) Q3 Earnings Beat Estimates, Revenues Lag
Tenneco Inc. reported adjusted earnings per share of $1.53 in the third quarter of 2016 that outpaced the Zacks Consensus Estimate of $1.49. Moreover, earnings per share increased 25.4% from $1.22 recorded in the third quarter of 2015. Also, adjusted net income went up 17.8% to $86 million from $73 million a year ago.
On a reported basis, Tenneco’s net income came in at $180 million or $3.21 per share, compared with $52 million or 88 cents per share in the year-ago quarter.
Revenues rose 3.5% year over year to $2.10 billion, but marginally missed the Zacks Consensus Estimate of $2.12 billion. The year-over-year improvement in the top line was aided by strong revenues in global light vehicles, primarily in the Clean Air and Ride Performance lines. Excluding currency effects, revenues rose 5% to $2.1 billion. Revenue growth outpaced global aggregate industry production growth of 5%.
Global aftermarket revenues dropped 2.7% year over year. Commercial truck and off-highway revenue fell 11.1% due to off-highway market decline in North America. Light vehicle revenue rose 7.3%.
Adjusted EBIT (earnings before interest, taxes and non-controlling interests) increased 5.3% to $159 million from $151 million a year ago. The upside was driven by higher light vehicle volumes and the strength of the company’s light vehicle platform position, including the new platform launches as well as operational improvements in China and Europe. Adjusted EBIT margin improved to 7.6% from 7.5% a year ago.
Shares of the company fell almost 1% to $54.66 on Oct 28.
Segment Results
Revenues from the Clean Air division rose 3.5% to $1.46 billion from $1.41 billion a year ago. Adjusted EBIT increased to $113 million from $107 million in the prior-year quarter.
Revenues from the Ride Performance division rose to $636 million from $617 million a year ago. Adjusted EBIT increased to $68 million from $58 million in the year-ago quarter.
Financial Position
Tenneco had cash and cash equivalents of $324 million as of Sep 30, 2016, up from $287 million as of Dec 31, 2015. Long-term debt was $1.31 billion as of Sep 30, 2016, compared with $1.21 billion as of Dec 31, 2015.
In the first nine months of 2016, cash flow from operating activities was $239 million, compared with $188 million in the first nine months of 2015. Capital expenditures for the said period totaled $209 million compared with $218 million a year ago.
Share Repurchase
In third-quarter 2016, the company bought back 1.7 million shares for $89 million. Since announcing the share repurchase program in 2015, Tenneco has repurchased 7 million shares for $359 million, representing 11% of shares outstanding at that time.
Outlook
Total revenue is expected to improve about 3% in the fourth quarter of 2016 based on better production levels. Revenues in the fourth quarter will also benefit from a stronger global aftermarket. Commercial truck revenue is expected to be in line with industry truck production, while off-highway revenue is likely to be negatively impacted by weakness in the European and North American markets.
For 2016, Tenneco continues to anticipate total revenue growth of about 6%. It expects to exceed global industry production by 3%. The company also expects full-year margin to improve year over year. Tenneco further expects that it will record a better performance in both 2017 and 2018.
TENNECO INC Price, Consensus and EPS Surprise
TENNECO INC Price, Consensus and EPS Surprise | TENNECO INC Quote
Zacks Rank
Tenneco currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the auto space include Spartan Motors Inc. , Gentex Corp. (GNTX - Free Report) and Standard Motor Products Inc. (SMP - Free Report) .
Standard Motor, with a long-term expected growth rate of 15%, sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Spartan Motors, carrying a Zacks Rank #2 (Buy), has a long-term expected growth rate of 15%.
Gentex, also a Zacks Rank #2 stock, has a long-term expected growth rate of 11.17%.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>