Shares of Tenneco (TEN) lost more than a third of their value in March (down 36%) according to data provided by S&P Global Market Intelligence. Most of the loss came after the company's March 14 earnings release. In fact, the stock was down just mid single digits early in the month, so investors wiped out roughly 30% of the stock's value following the earnings news.
Tenneco tried to put its best foot forward, highlighting the positives in the fourth quarter and for the full year 2018. However, the company missed earnings estimates by $0.11 a share in the fourth quarter. That's a big miss. Adding to the trepidation, the auto parts company also noted that it had found an accounting discrepancy that it said would have no impact on results. But any news of that sort tends to spook investors, especially when it comes from a company that's in the middle of integrating a large acquisition (Tenneco bought Federal-Mogul for $5.4 billion in the second half of 2018).
The biggest concern, however, was likely the company's relatively weak outlook. Although Tenneco believes its revenue will be able to grow faster than the sectors it serves, the company and broader auto industry are facing headwinds that will lead to flat EBITDA margins in 2019. These issues, including slowing auto sales in key markets and higher steel prices, are largely out of the company's control. It looks like 2019 could be a tough one for Tenneco, which is also working through internal issues, including plans to break itself into two different companies.
As Tenneco integrates a large acquisition and sets itself up to spin off assets, it's probably best viewed as a special situations stock right now. That's doubly true given that a lot of the activity taking place at the company involves shareholder activist Carl Icahn. The quarterly earnings miss and tepid outlook for 2019 only add to the uncertainty. Investors are better off watching from the sidelines for now.