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Tenneco (TEN) Down 6.9% Since Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Tenneco Inc. (TEN - Free Report) . Shares have lost about 6.9% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it 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 Earnings and Revenues Beat Estimates in Q2

Tenneco reported second-quarter 2017 results, wherein adjusted earnings per share of $1.90 outpaced the Zacks Consensus Estimate of $1.80. The company’s adjusted earnings per share in the prior-year quarter were $1.75.

On a reported basis, Tenneco’s net loss in the second quarter was $2 million, whereas second-quarter 2016 net income came in at $84 million.

Revenues increased 5% year over year to $2.32 billion, surpassing the Zacks Consensus Estimate of $2.27 billion. The year-over-year improvement in the top line was aided by strong revenues at both the Clean Air and Ride Performance product lines.

Global aftermarket revenues were almost flat on a year-over-year basis. Commercial truck increased 26%, while off-highway and specialty revenues rose 8%. Meanwhile, light vehicle revenues increased 5%, owing to the company’s global platform position.

Adjusted EBIT (earnings before interest, taxes and non-controlling interests) increased to $179 million during the reported quarter. The EBIT results indicate strong light vehicle volumes, strong commercial truck growth and off-highway revenues, and timing of commodity cost recoveries and other offsets.

Segment Results

Revenues from the Clean Air division increased 4.3% to $1.6 billion during the quarter. Adjusted EBIT decreased to $126 million from $132 million in the prior-year quarter.

Revenues from the Ride Performance division rose 5.8% to $698 million. Adjusted EBIT decreased to $72 million from $75 million in the year-ago quarter.

Financial Position

Tenneco had cash and cash equivalents of $333 million as of Jun 30, 2017, down from $347 million as of Dec 31, 2016. Long-term debt was $1.49 billion as of Jun 30, 2017, compared with $1.29 billion as of Dec 31, 2016.

Share Repurchase

In second-quarter 2017, the company bought back 783,800 shares for $44 million.

Outlook

Total revenue is expected to improve about 7% year over year on a constant currency basis in third-quarter 2017. Also, the company anticipates minimal currency headwind in the third quarter.

Management believes that the organic revenue growth will be driven by Clean Air and Ride Performance content on top-selling light vehicle platforms globally, continued strong commercial truck and off-highway revenues growth, and a steady contribution from the global aftermarket.

Total revenue is also expected to improve about 6% year over year on a constant-currency basis in 2017.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter compared to one lower.

Tenneco Inc. Price and Consensus

 

Tenneco Inc. Price and Consensus | Tenneco Inc. Quote

VGM Scores

At this time, Tenneco's stock has a great Growth Score of A, though it is lagging a lot on the momentum front with a D.  The stock was allocated a grade of A on the value side, putting it in the top quintile 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.

Based on our scores, the stock is equally suitable for value and growth investors.

Outlook

Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising.  Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.




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