Tenneco (TEN) Down 75.3% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Tenneco (TEN). Shares have lost about 75.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Tenneco due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Tenneco Delivers Dismal Q4 Show

Tenneco posted fourth-quarter 2019 adjusted earnings per share of 28 cents, missing the consensus mark of 42 cents and declining 78.4% year over year. Revenues totaled $4,143 million, missing the Zacks Consensus Estimate of $4,204 million. The top line also declined from $4,278 million recorded in fourth-quarter 2018.

Segmental Highlights

The Clean Air division’s revenues were $1,743 million compared with the year-earlier figure of $1,655 million. Adjusted EBITDA totaled $142 million in the quarter under review, down from $151 million in the year-ago quarter.

Revenues in the Ride Performance division came in at $641 million compared with $684 million recorded in the year-ago quarter. Adjusted EBITDA totaled $34 million in the quarter under review, down 33.3% year over year.

The Powertrain division’s revenues summed $1,018 million, down from $1,112 million recorded in the corresponding quarter of 2018. Adjusted EBITDA totaled $82 million in the quarter under review, down 39.3% year over year.

The Motorparts division’s revenues were $741 million, which fell from $827 million generated in fourth-quarter 2018. Adjusted EBITDA totaled $103 million in the quarter under review, down from $118 million recorded in fourth-quarter 2018.

Financial Position

Tenneco had cash and cash equivalents of $564 million as of Dec 31, 2019. Long-term debt was $5.37 billion, with a debt-to-capital ratio of 78.7%.

Outlook

Per IHS Markit, global light vehicle production is expected to fall 4% in 2020, and impact the company’s revenues and earnings. The firm expects unfavorable foreign currency translations to negatively impact revenues by 1% year over year. For full-year 2020, the company expects revenues in the range of $16.7-$17.1 billion. Further, adjusted EBITDA is projected at $1.3-$1.45 billion. Adjusted free cash flow is anticipated in the band of $100-$200 million.

First-quarter revenues are forecast between $3.95 billion and $4.15 billion. Adjusted EBITDA is anticipated in the range of $240-$280 million. Amid the coronavirus outbreak in China, Tenneco expects $150-million impact on value-add revenues and $50 million on EBITDA.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -124.57% due to these changes.

VGM Scores

At this time, Tenneco has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Tenneco has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.