On May 10, we upgraded
) to Neutral based on its strong commercial vehicle business and
robust performance in the first quarter of 2013. However, we are
concerned about the high customer concentration and weak demand
for high-margin aftermarket parts.
AUTOZONE INC (AZO): Free Stock Analysis
DENSO CORP (DNZOY): Get Free Report
FORD MOTOR CO (F): Free Stock Analysis Report
TENNECO INC (TEN): Free Stock Analysis Report
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Why the Upgrade?
On Apr 29, Tenneco reported a 9.1% increase in adjusted earnings
per share to 72 cents for the first quarter of 2013 from 66 cents
a year ago, surpassing the Zacks Consensus Estimate by 7 cents.
Net income augmented 7.3% to $44.0 million from $41.0 million a
Revenues increased marginally to $1.90 billion, beating the Zacks
Consensus Estimate of $1.84 billion. The year-over-year increase
in revenues was attributable to higher revenues from Clean Air
division, partially offset by decline in revenues from Ride
Following the release of the first-quarter results, the Zacks
Consensus Estimate for 2013 increased 1.7% to $3.65 per share.
The Zacks Consensus Estimate for 2014 also went up 1.1% to $4.47
per share. Currently, the company carries a Zacks Rank #3 (Hold).
The Emission Control segment of the company will have a favorable
impact from tighter emission regulations through 2015, with its
global market share reaching 10%. Tenneco expects to achieve a
5-year average compound annual OE revenue growth rate of 18% to
20% through 2014 with the implementation of emission regulations.
In addition, the diversified platform mix of Tenneco will lead to
its business expansion. The company also plans to broaden its
product portfolio, gain new business and attain a dominant
position in the emerging markets through various acquisitions and
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.
Other Stocks to Consider
) is performing well in the same industry where Tenneco operates.
The stock holds a Zacks Rank #1 (Strong Buy).