On Mar 6, 2015, we issued an updated research report on Tenneco Inc. TEN. The company had delivered a positive earnings surprise of 3.96% in the last reported quarter.
Tenneco reported adjusted earnings per share of $1.05 in the fourth quarter of 2014, up 9.4% year over year and ahead of the Zacks Consensus Estimate of $1.01.
Tenneco focuses on capital deployment to boost shareholder value. In 2014, the company completed the repurchase of 400,000 outstanding shares for $22 million. On Feb 2, 2015, Tenneco announced that its board of directors authorized the repurchase of up to $350 million worth of shares over the next three years. This demonstrates the company’s financial strength and commitment to enhance shareholder value.
However, we are concerned about the pricing pressure from original equipment manufacturers (OEM). In addition, Tenneco largely depends on a few customers in the OEM segment, including General Motors Company GM and Ford Motor Co. F. Also, sales and pricing to automotive retailers have been soft as they have been consolidating and forcing pricing concessions. In addition, Tenneco faces challenges in the off-highway industry and production weakness in the commercial truck market in Brazil.
In 2015, the company expects revenues to benefit from a rise in global light vehicle industry production, a strong position in light vehicle programs, especially in the world’s largest and fastest-growing geographic markets, and strict regulation of emissions.
For the first quarter of 2015, Tenneco expects total original equipment and aftermarket revenue to improve about 4%. For 2015, Tenneco expects total combined original equipment and aftermarket revenue to improve in the range of 5–8%, excluding the impact of currency.
Tenneco currently carries a Zacks Rank #3 (Hold). Meritor, Inc. MTOR is a better-ranked auto stock in the same industry, holding a Zacks Rank #2 (Buy).
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