What happened
Shares of Tenneco (TEN) fell more than 15% on Monday after the auto parts manufacturer released quarterly results. The company's earnings fell short of estimates, causing investors to run for the exits.
So what
Tenneco before markets opened Monday reported third-quarter adjusted earnings of $0.33 per share, missing analyst expectations for $0.44 per share in earnings. Revenue, at $4.3 billion, was down 2% year over year but came in ahead of the consensus $3.9 billion estimate.
Without adjustments, Tenneco reported a net loss in the quarter of $499 million, or $6.12 per share. That figure includes a non-cash, tax-valuation allowance charge of $523 million. In layman's terms, that means Tenneco is assuming it won't make enough in future years to fully take advantage of losses that it had hoped to use to offset future taxes.
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Overall, the operating quarter was not bad. Tenneco reported adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $388 million, up slightly from a year prior. And cash generation from operations totaled $486 million.
"Our third quarter results demonstrate the effectiveness of our operational execution as we leveraged Tenneco's global scale and diversified portfolio to deliver strong cash flow performance and year-over-year margin expansion in the face of the prolonged impact of the COVID pandemic," CEO Brian Kesseler said in a statement .
Now what
Tenneco isn't forecasting much growth in the fourth quarter, saying its value-added revenue will likely be even with the last three months as auto industry assumptions about light-vehicle production grows more conservative. The company also held tight with its forecast from last quarter that it expects to spend $380 million on capital expenditure (capex) for the year.
Tenneco ended the quarter with $1.8 billion in total liquidity, up from $1.4 billion at the end of the second quarter, and though it still has $5.8 billion in total debt, it was able to pay down a revolving credit facility during the quarter.
As Kesseler notes, the pandemic is making life difficult for auto suppliers, and the company for now is in a wait-and-see mode. Investors on Monday appear to be in no mood to wait, sending the shares falling post-earnings.
