Tenneco Inc. has reported a second quarter net loss of $2 million, or 3-cents per diluted share, which includes adjustments of $104 million after tax. Second quarter 2016 net income* was $84 million, or $1.46 per diluted share. Adjusted net income increased to $102 million, or $1.90 per diluted share, versus $100 million or $1.75 per diluted share last year.*
Second quarter revenue was $2.317 billion, up 5 percent year-over-year, driven by growth in both the Ride Performance and Clean Air product lines. On a constant currency basis, total second quarter revenue increased 6 percent, outpacing flat industry production, as noted by IHS data. Record high revenue in the quarter reflects a 5 percent increase in light vehicle revenue on the strength of the company’s global platform position.
Commercial truck revenue increased 26 percent, outpacing industry growth of 4 percent, with increases in all regions. Off-highway and specialty revenue improved 8 percent year-over-year on higher volumes in Europe and Japan, with North America revenue steady versus last year. Global aftermarket revenue was roughly flat versus last year.
Second quarter EBIT (earnings before interest, taxes and non-controlling interests) was $28 million, versus $173 million last year. Adjusted EBIT rose to $179 million. Excluding a negative currency impact of $8 million, adjusted EBIT was $187 million.
Tenneco EBIT as a percent of revenue was 1.2 percent. Adjusted EBIT as a percent of value-add revenue was 10.1 p. Excluding a 30 basis point currency headwind, adjusted EBIT as a percent of value-add revenue was 10.4 percent.
During the quarter, Tenneco repurchased 783,800 shares of common stock for $44 million, and paid a dividend of 25-cents per share, for $13 million.
Outlook
In the third quarter, Tenneco expects year-over-year revenue growth of approximately 7 percent on a constant currency basis, outpacing estimated light vehicle industry production growth (IHS data) by 5 percentage points. The company anticipates minimal currency impact on the year-over-year revenue comparison in the third quarter, based on exchange rates at the end of the second quarter.
The company’s organic revenue growth is expected to be driven by Ride Performance and Clean Air content on top-selling light vehicle platforms globally, strong double digit growth in commercial truck and off-highway revenue and a steady contribution from the global aftermarket.
Full Year 2017
Tenneco announced an increase to its full-year revenue growth outlook. On a constant currency basis, the company now expects year-over-year revenue growth of 6 percent, outpacing estimated light vehicle industry growth by 5 percentage points.
The company expects second-half 2017 value add adjusted EBIT margins to be in line with the prior year second half.
Tenneco updated its anticipated tax rate, and now expects a tax rate between 27 to 28 percent for 2017, due to continued optimization of the global business structure.
“We’re pleased with our year-to-date results, including revenue growth, strong earnings, and improved cash performance,” said Brian Kesseler, Tenneco CEO. “As a result of the strong outlook for both our light vehicle and commercial truck and off-highway revenues, we are raising our full-year revenue outlook and expect to outpace industry production by five percentage points. With these results and multiple and diverse core growth drivers, we are confident in our ability to continue accelerating top and bottom line growth.”
*Year-over-year earnings comparisons reflect revisions to prior period financial results for certain immaterial supplier cost reduction payments that Tenneco determined should have been recognized in future periods. Tenneco’s Form 10-Q for the second quarter may reflect further revisions based on Tenneco’s ongoing review of certain supplier payments, but Tenneco does not expect that any such revisions will be material to prior periods.
