Tenneco Inc. (NYSE: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
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. (NYSE:ALSN) , Cummins Inc. (NYSE:CMI) and CNH Industrial N.V. (NYSE: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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