Tenneco has reported second quarter net income of $86 million, or $1.49 per diluted share, compared with $78 million, or $1.26 per share in second quarter 2015, an improvement of 18 percent on a per share basis. Adjusted net income rose to $102 million, or $1.78 per diluted share, versus $86 million or $1.39 per share last year, representing earnings per share (EPS) growth of 28 percent versus last year. The EPS results represent new record highs for the second quarter.
Revenue
Total revenue in the second quarter was $2.2 billion, up 4 percent year-over-year, driven by light vehicle revenue growth led by Europe, China and India. Total light vehicle revenue grew 6 percent, commercial truck and off-highway revenue declined 1 percent and global aftermarket revenue was 4 percent lower versus a year ago.
On a constant currency basis, Tenneco’s revenue in the quarter was $2.3 billion, an increase of 6 percent versus last year, outpacing global aggregate industry production growth of 3 percent. On a constant currency basis, light vehicle revenue grew 9 percent, commercial truck and off-highway revenue grew 1 percent and global aftermarket revenue was even with strong revenues a year ago.
“Our strong performance exceeded our outlook for revenue growth in excess of industry production and delivered another quarter of margin improvement,” said Gregg Sherrill, Tenneco chairman and CEO. “At the mid-point for the year, I’m pleased with our execution on growth strategies for both Clean Air and Ride Performance and with our improved profitability as we continue to launch new content and drive greater process discipline throughout our business.”
Outlook
In the third quarter, Tenneco expects to outpace aggregate industry production by 2 percentage points resulting in total revenue growth of 7 percent compared with a year ago. Aggregate industry production is forecast to grow 5 percent* in the third quarter, including an increase in global light vehicle production of 5 percent and a 1 percent decline in combined commercial truck and off-highway industry production.
Tenneco’s expected revenue growth in the third quarter will be driven by stronger global light vehicle volumes, including new launches and the ramp up on recently launched platforms, and a solid contribution from the global aftermarket. Commercial truck and off-highway revenue is expected to be roughly in line with industry production.
For the full year, the company continues to expect to outpace aggregate industry production by 3 percent for total revenue growth of 6 percent year-over-year, with a fourth quarter outpace similar to the third quarter.
Tenneco also expects continued year-over-year adjusted margin expansion for the remainder of the year. Year-to-date, EBIT as a percent of revenue has increased 30 basis points, and adjusted EBIT as a percent of value-add revenue has increased 60 basis points.
In addition to reconfirming the 2016 revenue outlook, Tenneco has secured the necessary future business, including incremental platforms and content, to outpace industry production in 2017 and 2018, as indicated in the company’s January 2016 revenue expectations.
“Tenneco is in a strong position to further accelerate profitable growth. With business secured to meet our 2017 and 2018 estimates for outgrowing industry production, we’re focused on future opportunities and highly confident in our ability to continue delivering growth that outpaces industry production,” said Sherrill. “Margins continue to expand and we’re generating strong cash flow and returning value to shareholders through stock repurchases.”
*Aggregate Industry Production: IHS Automotive July 2016 global light vehicle production forecasts, Power Systems Research (PSR) July 2016 forecast for global commercial truck and buses, PSR off-highway engine production in North America and Europe and Tenneco estimates.
