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Moody’s Rated Tenneco Debt as ‘Ba3’

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Price movement of Tenneco

Tenneco (TEN) has a market cap of $3.0 billion. It rose by 2.4% to close at $53.10 per share on June 6, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -2.7%, 3.6%, and 15.7%, respectively, as of the same day.

This means that TEN is trading 1.3% above its 20-day moving average, 4.2% above its 50-day moving average, and 10.7% above its 200-day moving average.

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Related ETF and peers

The iShares Morningstar Small Value ETF (JKL) invests 0.58% of its holdings in Tenneco. The ETF tracks a market-cap-weighted index of US small-cap value stocks. The index tracks stocks from the 90th to the 97th percentile of the market-cap spectrum, using fundamental factors. The YTD price movement of JKL was 10.2% on June 6, 2016.

The market caps of Tenneco’s competitors are as follows:

  • Cummins (CMI) — $19.8 billion
  • BorgWarner (BWA) — $7.5 billion
  • Lear Corporation (LEA) — $8.6 billion

Moody’s rated Tenneco debt

In a release on June 6, 2016, Moody’s stated, “Moody’s Investors Service has rated Tenneco’s new $500 million of senior unsecured notes due 2026 as ‘Ba3’. The net proceeds from these notes and certain other funds will be used to fund the tender offer of any and all of its outstanding $500 million 6 7/8% senior notes due 2020, to redeem any of such notes that are not tendered at a redemption price of 103.438%, pay fees, premiums, expenses and unpaid and accrued interest related to the tender offer or redemption.”

Tenneco has commenced a cash tender offer that expires at 5:00 PM EDT on June 10, 2016.

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Performance of Tenneco in fiscal 1Q16

Tenneco (TEN) reported fiscal 1Q16 net sales and operating revenues of ~$2.1 billion, a rise of 5.6% compared to net sales and operating revenues of ~$2.0 billion in fiscal 1Q15. The value-added revenues of its Clean Air division and Ride Performance division rose by 6.8% and 0.49%, respectively. The substrate sales of the Clean Air division rose by 9.9% in fiscal 1Q16 compared to fiscal 1Q15.

The company’s net income and EPS (earnings per share) rose to $57.0 million and $0.99, respectively, in fiscal 1Q16, compared to $49.0 million and $0.80, respectively, in fiscal 1Q15.

Tenneco’s cash and cash equivalents and inventories rose by 30.3% and 9.4%, respectively, in fiscal 1Q16 compared to fiscal 4Q15.

Projections

Tenneco (TEN) has made the following projections:

  • For fiscal 2Q16, it expects total revenue growth of 6%, which will be driven by global light vehicle volumes including new launches, the ramp-up on launched platforms, and a contribution from the global aftermarket.
  • For fiscal 2016, it expects annual revenue growth of 6%, which excludes currency based on current aggregate industry production estimates.
  • It also expects an increase in growth rate in 2017 and 2018 due to new light vehicle emissions regulations, which is coming into effect in North America and Europe.

In the next part of this series, we’ll take a look at Oshkosh Corporation (OSK).

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