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Tenneco (TEN) Lags Q1 Earnings Estimates, Lowers 2019 Outlook

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Tenneco Inc. (TEN - Free Report) reported first-quarter 2019 results, wherein adjusted earnings per share of 52 cents missed the Zacks Consensus Estimate of 94 cents. Also, the company’s bottom line declined from the prior-year quarter figure of $1.62.

In the reported quarter, Tenneco’s adjusted net income was $42 million compared with $83 million in first-quarter 2018.

Quarterly revenues rose 74% year over year to $4.5 billion, almost in line with the Zacks Consensus Estimate. On a constant-currency basis, organic revenues rose 4%, and net revenue growth from acquisitions and divestitures was 75%, partly offset by 5% negative impact of currency translation.

Tenneco Inc. Price, Consensus and EPS Surprise

 

Adjusted EBITDA (income before interest expenses, income taxes, noncontrolling interests and depreciation, and amortization) was $327 million compared with $212 million recorded in the prior-year quarter. Apart from the acquired Federal-Mogul business, the figure includes weaker aftermarket, and China OE volumes and related operational inefficiencies.

Segmental Results

After the inclusion of Federal-Mogul business, Tenneco operates under four segments, consisting of Clean Air, Ride Performance, Powertrain and Motorparts. The Motorparts segment reflects the company’s historical Aftermarket units along with the Motorparts aftermarket business of Federal-Mogul. Further, Ride Performance division comprises Tenneco’s historical Ride Performance segment and Motorparts OE business of the acquired Federal-Mogul.

The Clean Air division’s first-quarter revenues were $1.78 billion compared with the year-earlier figure of $1.76 billion.

Revenues in the Ride Performance division were $733 million compared with $513 million recorded in the year-ago quarter.

The Powertrain division’s first-quarter revenues were $1.2 billion.

The Motorparts division’s revenues were $797 million, up from $312 million generated in first-quarter 2018.

Financial Position

Tenneco had cash and cash equivalents of $697 million as of Mar 31, 2019, up from $315 million as of Dec 31, 2018. Long-term debt was $5.3 billion as of Mar 31, 2019, compared with $1.36 billion as of Dec 31, 2018.

Outlook

For the second quarter of 2019, the company expects revenues of $4.45-$4.55 billion, similar to the first quarter. Further, adjusted EBITDA is projected to be $375-$395 million.

Tenneco revised its guidance for 2019. It expects revenues of $17.7-$18.1 billion compared with $18.2-$18.4 billion stated earlier. On a pro forma basis, it expects organic revenue growth rate to be 3%, with currency translation impact of negative 2%.

Zacks Rank & Stocks to Consider

Tenneco currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader auto sector are Cummins Inc. (CMI - Free Report) , Gentex Corporation (GNTX - Free Report) and LCI Industries (LCII - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cummins has an expected long-term growth rate of 8.4%. The stock has gained 11.6% in the past three months.

LCI has an expected long-term growth rate of 16%. The stock has gained 13.5% in the past three months.

Fox Factory has an expected long-term growth rate of 16.4%. Over the past three months, shares of the company have gained 20.6%.

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