On Jan 13, 2014, we maintained the Neutral recommendation on
). The company is expected to benefit from tighter emission
regulations and focus on maximizing manufacturing efficiency.
However, relatively weak demand in the high-margin aftermarket
parts business and high customer concentration poses a
Why the Reiteration?
Tenneco reported adjusted earnings per share of 99 cents in
the third quarter of 2013, which surpassed the Zacks Consensus
Estimate of 95 cents. Earnings per share surged 16.5% year over
year from 85 cents in the third quarter of 2012.
There has been no estimate revision for Tenneco's 2013
earnings per share in the last 60 days. Thus, the Zacks Consensus
Estimate stands at $3.65 per share, up 9.91% from 2012.
Tenneco expects revenues to grow significantly in the fourth
quarter and full year. The company expects original
equipment (OE) revenues between $6.4 billion and $6.8 billion for
2013, including commercial vehicle revenues in a range of $0.9
billion and $1.1 billion.
For 2014, the company anticipates OE revenues between $7.2
billion and $7.7 billion, including commercial vehicle revenues
in the range of $1.3 billion to $1.6 billion. The improvement in
the year will be driven by better macroeconomic conditions
globally, resulting in stronger light and commercial vehicle
The company expects to achieve a 5-year average compound
annual OE revenue growth rate of 18% to 20% through 2014, driven
by emissions regulations that are being implemented globally.
Tenneco's diversified product offering has helped win significant
However, pricing pressure from original equipment
manufacturers (OEMs) remains a problem for Tenneco. Additionally,
the company largely depends on a few customers in the OEM
segment. The company also faces weak demand for aftermarket parts
compared to original equipments.
Thus, considering the pros and cons, we have maintained our
Other Stocks to Consider
Tenneco currently carries a Zacks Rank #2 (Buy). Other stocks
worth considering with the same Zacks Rank include
American Axle & Manufacturing Holdings Inc.
Magna International Inc.
AMER AXLE & MFG (AXL): Free Stock Analysis
FEDERAL MOGUL-A (FDML): Free Stock Analysis
MAGNA INTL CL A (MGA): Free Stock Analysis
TENNECO INC (TEN): Free Stock Analysis Report
To read this article on Zacks.com click here.