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Tenneco (TEN) Earnings and Revenues Beat Estimates in Q1

Tenneco Inc.TEN recently reported first-quarter 2017 results, wherein adjusted earnings per share of $1.53 outpaced the Zacks Consensus Estimate of $1.41. Moreover, earnings increased 31% from $1.17 recorded in the prior-year quarter.

Adjusted net income went up 24% to $83 million from $67 million a year ago. Despite the favorable outcome, the company's share price decreased 4.4% to $60.27 on May 1.

On a reported basis, Tenneco's net income was a first-quarter record at $63 million or $1.16 per share compared with $57 million or 99 cents recorded in the year-ago quarter.

Revenues rose 7% year over year to $2.29 billion, surpassing the Zacks Consensus Estimate of $2.24 billion. The year-over-year improvement in the top line was aided by strong revenues at both the Clean Air and Ride Performance product lines. Excluding currency effects, revenues rose 9% to $2.33 billion.

Global aftermarket revenues was almost on par with the year-ago quarter figure. Commercial truck increased 15%, while off-highway revenues were on par with year-ago figure due to weak industry production. Meanwhile, light vehicle revenues rose 11% owing to the company's global platform position.

Adjusted EBIT (earnings before interest, taxes and non-controlling interests) increased 11% to a first-quarter record of $153 million from $138 million a year ago. The upside was driven by leveraging strong light vehicle volumes, strong commercial truck growth and continuing operational efficiencies. Adjusted EBIT margin was 6.7% compared with 6.5% in the year-ago level.

Tenneco Inc. Price, Consensus and EPS Surprise

Tenneco Inc. Price, Consensus and EPS Surprise | Tenneco Inc. Quote

Segment Results

Revenues from the Clean Air division rose 6.7% to $1.6 billion from $1.5 billion a year ago. Adjusted EBIT increased to $119 million from $111 million in the prior-year quarter.

Revenues from the Ride Performance division rose to $661 million from $621 million a year ago. Adjusted EBIT increased to $60 million from $63 million in the year-ago quarter.

Financial Position

Tenneco had cash and cash equivalents of $341 million as of Mar 31, 2017, down from $347 million as of Dec 31, 2016. Long-term debt was $1.41 billion as of Mar 31, 2017, compared with $1.29 billion as of Dec 31, 2016.

In the reported quarter, cash used by operating activities was $9 million compared with $29 million used in the prior-year quarter.

Share Repurchase

In first-quarter 2017, the company bought back 240,000 shares for $16 million.

Outlook

Total revenue is expected to improve about 5% year over year on a constant currency basis in second-quarter 2017. Also, the company anticipates roughly 2% currency headwind in the second quarter.

Management believes that the organic revenue growth will be driven by Clean Air and Ride Performance content on top-selling light vehicle platforms globally, continued strong commercial truck growth and a steady contribution from the global aftermarket.

Total revenue is also expected to improve about 5% year over year on a constant currency basis in 2017. The company also expects annual margins to improve year over year in 2017.

Price Performance

In the last six months, Tenneco's share rallied 13% while the Zacks categorized Auto/Truck Original Equipment industry recorded 24.2% growth.

Zacks Rank & Key Picks

Tenneco currently carries a Zacks Rank #3 (Hold).

Better-ranked companies in the auto space include Allison Transmission Holdings, Inc. ALSN , Cummins Inc. CMI and CNH Industrial N.V. CNHI .

Allison Transmission Holdings has an expected long-term growth of 11% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Cummins has an expected long-term growth of 9.8% and carries a Zacks Rank #2 (Buy).

CNH Industrial has an expected long-term growth of 20% and carries a Zacks Rank #2.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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