Please ensure Javascript is enabled for purposes of website accessibility

Tenneco Shares Drop 21% Friday After a Business Update

By Daniel Miller - Updated Apr 3, 2020 at 4:07PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The impact of COVID-19 was a main topic pf discussion.

What happened

Shares of Tenneco (TEN 0.47%), a leading designer and manufacturer of automotive products and solutions, were down 21% on Friday after the company provided investors with a business update regarding the COVID-19 outbreak.

So what

Management provided an update on multiple aspects of its business and started off by withdrawing its first-quarter and full-year guidance due to high levels of uncertainty surrounding COVID-19. Tenneco also temporarily suspended or reduced operations across the Americas; Europe, the Middle East, and Africa; and the Asia-Pacific regions.

Management believes the impact to its business will peak during the second quarter, and the company will take steps to partly offset the damage: Overall salary costs will be reduced at least 25% through furloughs and pay cuts, while executives will reduce their salaries by 50%, and the CEO will not draw a salary. Capital expenditures in 2020 will be reduced to less than $400 million, compared with previous guidance between $610 million and $650 million.

Assortment of car parts

Image source: Getty Images.

In a press release, CEO Brian Kesseler said: "The continuing near-term deterioration in demand in our end markets necessitates further difficult decisions. These steps, together with the continued execution of our Accelerate plan introduced earlier this year, will allow us to return to full operations more efficiently when demand returns and allow us to continue on the path to building a stronger Tenneco." 

Now what

The automotive industry has been one of the hardest hit areas as consumers put off big-ticket purchases, which sends a wave of negative implications throughout the industry. Tenneco has significant liquidity, which should enable it to weather the storm: It has roughly $700 in cash and a revolving credit facility of $1.5 billion, and no significant near-term debt maturities.

Markets will eventually rebound from the disruptions caused by COVID-19, but not all companies have the strong balance sheet to weather the storm. While the downturn can provide opportunities for investors to buy stocks at a cheaper price, make sure you're investing in financially sound companies with an intact long-term growth story.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Tenneco Stock Quote
Tenneco
TEN
$17.16 (0.47%) $0.08

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
317%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.