DNZOY Denso Corp Ltd (PK)

Tenneco Inc. (TEN) reported a 9.1% increase in adjusted earnings per share to 72 cents in 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 year ago. On a reported basis, the company’s profit was $54.0 million or 88 cents per share compared with $30.0 million or 49 cents in the first quarter of 2012.

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 Performance.

Adjusted EBIT (earnings before interest, taxes and non-controlling interests) remained flat year over year at $97.0 million. Adjusted EBIT benefited from higher Clean Air EBIT offset by declining Ride Performance EBIT.

Segment Results

Revenues from Clean Air Division improved marginally to $1.29 billion from $1.28 billion a year ago. The improvement was due to higher revenues from Asia Pacific, mainly driven by increase in light vehicle production in China. Adjusted EBIT augmented to $78.0 million from $76.0 million due to higher Asia Pacific volumes and effective operational cost management.

Revenues from Ride Performance Division fell 3.2% to $607.0 million due to lower light and commercial vehicle revenues in Europe and lower commercial vehicle revenues in North America. Adjusted EBIT declined to $40.0 million from $44.0 million due to lower volumes in Europe and North America and related manufacturing absorption costs.

Financial Position

Tenneco had cash and cash equivalents of $242.0 million as of Mar 31, 2013, up from $223.0 million as of Dec 31, 2012. Net debt was $1.38 billion as of Mar 31, 2013 compared with $1.18 billion as of Dec 31, 2012.

For the first three months of 2013, the company had cash outflow from operating activities of $123.0 million, up from $85.0 million in the year-ago period. Capital expenditures for the period were $70.0 million compared with $65.0 million in the corresponding period year ago.

Outlook

Based on IHS forecasts, the company expects that total light vehicle production will increase 3% in the second quarter of 2013, with a 4% rise in North America, 8% hike in China, 9% increase in South America and 3% boost in India. However, it will decline 3% in Europe due to the economic uncertainty.

Our Take

Tenneco is a leading manufacturer and supplier of emission control, ride control systems, and systems for the automotive original equipment manufacturers (OEMs) and the aftermarket. Currently, the company retains a Zacks Rank #3 (Hold).

Some other stocks that are performing well in the industry where Tenneco operates include Gentherm Inc. (THRM), Visteon Corp. (VC) and Denso Corp. (DNZOY). All these companies carry a Zacks Rank #1 (Strong Buy).

 
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