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Why Tenneco Popped 19% Wednesday Morning

By Daniel Miller - Feb 24, 2021 at 12:58PM

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Here's why Tenneco's fourth quarter should have investors optimistic for 2021.

What happened

Shares of Tenneco (TEN 0.86%), a manufacturer of automotive products for original equipment manufacturers (OEMs) and aftermarket consumers, jumped as much as 19.2% Wednesday morning before giving back some gains. It had delivered a solid fourth-quarter performance.

So what

Starting from the top, Tenneco's fourth-quarter revenue increased 12% over the prior year to reach $4.7 billion. That result easily topped analysts' estimates calling for $4.3 billion. Adjusted net income also checked in with a large beat at $1.68 per share, compared to analysts' estimates of $1.01 per share. Management's "Acelerate+" program drove margin expansion and is on pace to hit $265 million in annual run rate savings by the end of 2021. With margin improvements and strong cash flow generation, the company was able to reduce its net debt by $460 million from the end of the previous year.

Man working on automotive manufacturing

Image source: Getty Images.

Now what

In addition to its strong financial performance during the fourth quarter, the company improved its liquidity from $1.8 billion at the end of the third quarter to $2.3 billion at year end. Investors should feel optimistic that management has successfully navigated the COVID-19 pandemic and can take its momentum in margin expansion, cash generation, and debt reduction into a strong 2021, which shouldn't be taken for granted in the hit-or-miss automotive industry.

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