Tenneco Inc.’s (TEN) shares gained 6.2% to reach $54.59 on Feb 2, after the company revealed its fourth-quarter and full-year 2014 financial results along with the guidance for full-year 2015. The company’s share price has increased significantly and consistently since then. In the last one week, Tenneco’s stock has gained 8.8%, significantly higher than the 3.3% gains recorded by the S&P 500.
Tenneco reported adjusted earnings per share of $1.05 in the fourth quarter of 2014, which beat the Zacks Consensus Estimate of $1.01. Earnings per share improved 9.4% from 96 cents in the fourth quarter of 2013. Adjusted net income increased 10.2% to $65 million from $59 million a year ago.
On a reported basis, Tenneco’s net income came in at $21 million or 33 cents per share, compared with $54 million or 88 cents per share in the year-ago quarter. The reported net income in fourth-quarter 2014 includes restructuring, pension and refinancing-related expenses.
Revenues decreased 1.3% year over year to $2 billion, marginally missing the Zacks Consensus Estimate of $2.04 billion. The decline can be attributed to negative currency effects and lower commercial truck and off-highway revenues. Excluding currency effects, revenues increased 3% to $2.09 billion.
Adjusted EBIT (earnings before interest, taxes and non-controlling interests) grew 7% to $136 million from $127 million a year ago. Adjusted EBIT benefited from a 6% increase in adjusted EBIT at the Clean Air Division and the Ride Performance Division. Meanwhile, adjusted EBIT margin improved to 6.8% from 6.3% a year ago.
2014 Performance
Earnings for full-year 2014 increased 23% to $4.65 per share from $3.78 in 2013 and surpassed the Zacks Consensus Estimate of $4.61. The enhanced profitability was based on strong light vehicle performance, double-digit revenue growth in the commercial truck and off-highway business, and better global aftermarket sales.
Revenues for 2014 increased 5.7% to $8.42 billion, marginally missing the Zacks Consensus Estimate of $8.46 billion. Revenues benefited from a 5% hike in OE light vehicle revenues and a 16% increase in commercial truck and off-highway OE revenues. Aftermarket revenues increased 1% in 2014.
Segment Results
Revenues from the Clean Air Division decreased 1.3% to $1.39 billion from $1.41 billion a year ago. Adjusted EBIT augmented 4.7% to $134 million from $128 million a year ago.
Revenues from the Ride Performance Division dropped 1.3% to $609 million from $617 million a year ago. Adjusted EBIT fell 10.8% to $58 million from $65 million.
Financial Position
Tenneco had cash and cash equivalents of $282 million as of Dec 31, 2014, up from $275 as of Dec 31, 2013. Total debt stood at $1.13 billion as of Dec 31, 2014 compared with $1.10 billion as of Dec 31, 2013.
In 2014, the company generated cash flow from operating activities of $252 million, down from $412 million in the year-ago period. Capital expenditures for the period totaled $317 million as against $254 million in the year-ago quarter.
Share Repurchase
In 2014, Tenneco completed the repurchase of 400,000 outstanding shares for $22 million. The company plans to offset dilution due to shares issued to employees in 2014 though the share repurchase.
On Feb 2, 2015, Tenneco announced that its board of directors has authorized the repurchase of up to $350 million shares over the next three years under the company’s overall capital allocation strategy. This increase in share repurchase authorization demonstrates the company’s financial strength and commitment to enhance shareholder value.
Outlook
In 2015, Tenneco’s revenues will benefit from consistent and strong structural growth such as hike in global light vehicle industry production, strong position in the light vehicle programs, especially in the world’s largest and fastest-growing geographic markets, and strict emissions regulations.
Based on IHS Automotive forecasts, for the first quarter of 2015, Tenneco expects total OE and aftermarket revenue to improve about 4%, based on better light vehicle unit volumes, additional content on commercial truck and off-highway programs to meet environmental regulations and improvement in the aftermarket.
For 2015, IHS Automotive forecasts a 3% increase in industry light vehicle production globally. Tenneco expects that its OE light vehicle revenue will outpace the industry, driven by its strong position and the launch and ramp up of new programs, and increased technology content. Revenues from commercial truck and off highway business should also improve year over year.
Tenneco’s global aftermarket business is also expected to perform exceedingly well based on the company’s leading market share in key regions. However, the company will face challenges in the off-highway industry and production weakness in commercial trucks market in Brazil.
Thus, for 2015, Tenneco expects total OE and aftermarket revenue to improve about 5% to 8%.
Tenneco retains a Zacks Rank #3 (Hold). Better-ranked stocks in the same industry include Superior Industries International, Inc. (SUP), Wabash National Corp. (WNC), and Daimler AG (DDAIF), all of which sport a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment