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Tenneco (TEN) Q4 Earnings Miss Estimates, 2020 View Bleak

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Tenneco Inc. TEN posted dismal fourth-quarter 2019 results, wherein earnings and sales not only missed the Zacks Consensus Estimate but also declined from the year-ago levels. Decline in light vehicle production amid macroeconomic headwinds and labor strike at General Motors (GM - Free Report) , the company’s largest customer, had a negative impact on fourth-quarter earnings and revenues.

The OEM auto supplier posted fourth-quarter 2019 adjusted earnings per share of 28 cents, missing the consensus mark of 42 cents and declining 78.4% year over year. Revenues totaled $4,143 million, missing the Zacks Consensus Estimate of $4,204 million. The top line also declined from $4,278 million recorded in fourth-quarter 2018.

Tenneco Inc. Price, Consensus and EPS Surprise

Tenneco Inc. Price, Consensus and EPS Surprise

Tenneco Inc. price-consensus-eps-surprise-chart | Tenneco Inc. Quote

Segmental Highlights

The Clean Air division’s revenues were $1,743 million compared with the year-earlier figure of $1,655 million. Adjusted EBITDA totaled $142 million in the quarter under review, down from $151 million in the year-ago quarter.

Revenues in the Ride Performance division came in at $641 million compared with $684 million recorded in the year-ago quarter. Adjusted EBITDA totaled $34 million in the quarter under review, down 33.3% year over year.

The Powertrain division’s revenues summed $1,018 million, down from $1,112 million recorded in the corresponding quarter of 2018. Adjusted EBITDA totaled $82 million in the quarter under review, down 39.3% year over year.

The Motorparts division’s revenues were $741 million, which fell from $827 million generated in fourth-quarter 2018. Adjusted EBITDA totaled $103 million in the quarter under review, down from $118 million recorded in fourth-quarter 2018.

Financial Position

Tenneco had cash and cash equivalents of $564 million as of Dec 31, 2019. Long-term debt was $5.37 billion, with a debt-to-capital ratio of 78.7%.

Outlook

Per IHS Markit, global light vehicle production is expected to fall 4% in 2020, and impact the company’s revenues and earnings. The firm expects unfavorable foreign currency translations to negatively impact revenues by 1% year over year. For full-year 2020, the company expects revenues in the range of $16.7-$17.1 billion. Further, adjusted EBITDA is projected at $1.3-$1.45 billion. Adjusted free cash flow is anticipated in the band of $100-$200 million.

First-quarter revenues are forecast between $3.95 billion and $4.15 billion. Adjusted EBITDA is anticipated in the range of $240-$280 million. Amid the coronavirus outbreak in China, Tenneco expects $150-million impact on value-add revenues and $50 million on EBITDA.

Zacks Rank & Stocks to Consider

Tenneco currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Auto-Tires-Trucks sector include BRP Inc. DOOO and SPX Corporation SPXC, each carrying a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BRP has a projected earnings growth rate of 20.2% for 2020. Its shares have surged 73.3% over the past year.

SPX has an expected earnings growth rate of 6.5% for the current year. The stock has rallied 36.7% in the past year.

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