On Feb 18, we downgraded emission control and ride control
) to Underperform, based on its lower-than-expected fourth
quarter earnings, high customer concentration and sluggish demand
for high-margin aftermarket parts.
Why the Downgrade?
Despite reporting a 25% rise in adjusted profit to $40.0 million
or 66 cents per share in the fourth quarter of 2012, Tenneco's'
EPS missed the Zacks Consensus Estimate by a couple of cents.
Revenues dipped 1.7% to $1.75 billion and fell short of the Zacks
Consensus Estimate of $1.78 billion.
Following the release of the fourth quarter results, the Zacks
Consensus Estimate for 2013 decreased 4.0% to $3.62 per share.
The Zacks Consensus Estimate for 2014 also went down 2.9% to
$4.40 per share. With the Zacks Consensus Estimates for both 2013
and 2014 going down, the company retains a Zacks Rank #5 (Strong
Tenneco remains under pressure as automotive retailers like
) demand heavy pricing concessions. In addition, the company
faces high customer concentration as the company's top 10
aftermarket customers, including
Ford Motor Co.
), constitute 50% of its total aftermarket sales.
Softness in demand for aftermarket parts compared to original
equipments (OE) is also challenging for the company. The
replacement cycles of the aftermarket products are longer, owing
to the improved quality of OE parts and higher average useful
life of automotive parts.
Other Stocks to Consider
Commercial Vehicle Group Inc.
) is performing well in the same industry where Tenneco operates.
The stock retains a Zacks Rank #1 (Strong Buy).
AUTOZONE INC (AZO): Free Stock Analysis
COMML VEHICLE (CVGI): Free Stock Analysis
FORD MOTOR CO (F): Free Stock Analysis Report
TENNECO INC (TEN): Free Stock Analysis Report
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