Tenneco Gains as Profit Beats Estimates, Sales Outlook Is Raised

  • Company sees 6% annual revenue growth excluding currency
  • Emissions regulations provide tailwind for clean-air products

Tenneco Inc. surged to a five-month high after the auto-parts supplier reported first-quarter earnings that topped analysts’ estimates, helped by demand for its emissions-control products, and increased its annual sales forecast.

The shares climbed 9.5 percent to $55.19 at 10:41 a.m. New York time after reaching $55.97, the highest intraday price since Nov. 3.

Strong sales of cars and light trucks contributed to a 7.8 percent revenue gain to $1.52 billion for Tenneco’s Clean Air division, which sells to automakers such as Daimler AG, Porsche, General Motors Co. and Ford Motor Co. The supplier posted record total first-quarter sales of $2.14 billion, benefiting as governments push for more fuel-efficient vehicles. Tenneco raised its 2016 revenue growth target excluding currency to 6 percent, 3 percentage points more than its outlook for global vehicle production.

“The stronger outlook for 2016 organic growth lends credence to management’s outlook for even stronger sales growth in 2017 and 2018, after more stringent emissions standards come into effect,” Ryan Brinkman, a JPMorgan analyst, wrote in a report Tuesday. He rates the stock overweight.

First-quarter earnings were $1.17 a share, excluding some items, the Lake Forest, Illinois-based company said in a statement Tuesday. That exceeded the $1.11 average estimate of 12 analysts surveyed by Bloomberg. The company’s quarterly revenue also beat the average projection of $2.08 billion.

Chief Executive Officer Gregg Sherrill said Tenneco is gaining from demand for both its emissions-control and ride-control products.

“You’ve got the intelligent suspension systems overlaying the growth in vehicle production on the ride side, you’ve got the emissions regulations overlaying the growth in production on the clean-air side,” he told analysts on a conference call. “That’s what gives us a lot of confidence in both our product lines from a growth perspective.”

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