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Tenneco (TEN) Up 3.3% Since Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Tenneco Inc. (TEN - Free Report) . Shares have added about 3.3% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is TEN due for a pullback? 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 catalysts.

Tenneco Q4 Earnings & Revenues Beat Estimates, Up Y/Y

Tenneco reported fourth-quarter 2017 results, wherein adjusted earnings per share came in at $1.89, surpassing the Zacks Consensus Estimate of $1.64. The company’s bottom line also improved from the prior-year quarter’s figure of $1.63.

Tenneco’s adjusted net income in the reported quarter was $97 million, compared with the metric’s $90 million in fourth-quarter 2016.

The company recorded quarterly revenues of $2.39 billion, beating the Zacks Consensus Estimate of $2.29 billion. Also, 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 slightly higher on a year-over-year basis. Commercial truck and off-highway revenues witnessed double-digit growth.

Adjusted EBIT (earnings before interest, taxes and non-controlling interests) increased to $168 million during the quarter under review from $153 million a year ago. The EBIT results indicate revenue gains across all product lines including commercial trucks, light vehicles and off-highway products.

Fiscal 2017 Results

Tenneco reported earnings of $3.91 per share in fiscal 2017, down from $6.31 earned in fiscal 2016. The Zacks Consensus Estimate for the metric was $7.3.

Adjusted net income was $207 million from $356 million a year ago. Revenues increased to $9.27 billion from $8.6 billion in fiscal 2016. However, the top line missed the Zacks Consensus Estimate of $9.63 billion.

Segment Results

Revenues from the Clean Air division increased 10% to $1.7 billion during the quarter. Adjusted EBIT rose to $125 million from $118 million in the prior-year quarter.

Revenues from the Ride Performance division rose 14% to $696 million. Adjusted EBIT increased to $35 million from a loss of $101 million recorded in the year-ago quarter.

Financial Position

Tenneco had cash and cash equivalents of $315 million as of Dec 31, 2017, down from $347 million as of Dec 31, 2016. Long-term debt was $1.4 billion as of Dec 31, 2017, compared with $1.3 billion as of Dec 31, 2016.

Share Repurchase

In fourth-quarter 2017, the company bought back 627,000 shares for $38 million and paid a cash dividend of 25 cents per share for $13 million.

In 2017, the company returned $222 million to shareholders including roughly 2.9 million shares for $169 million and dividend payments of $53 million.

Outlook

For first-quarter 2018, the company expects total revenues to improve about 3% year over year on a constant currency basis. Further, the company projects organic growth to outperform the industry’s increase through recently launched programs and a strong presence in the light vehicle market. Also, it estimates a double-digit rise in commercial truck and off-highway revenues.

In 2018, Tenneco expects 5% organic growth, outpacing the industry production by 3 percentage points. This upside is likely to be driven by the company’s both Ride Performance and Clean Air products.

Further, for 2019 and 2020, the company predicts its revenues to grow 6-8% and 5-7%, respectively.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.

Tenneco Inc. Price and Consensus

 

Tenneco Inc. Price and Consensus | Tenneco Inc. Quote

VGM Scores

At this time, TEN has an average Growth Score of C, though it is lagging a lot on the momentum front with an F. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for value investors than growth investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of this revision indicates a downward shift. Notably, TEN has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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