Dow Jones Newswires | Shares of Tenneco Inc. (TEN) jumped a day
after the auto-parts maker projected a much bigger market for its
emission control systems.
In a meeting with analysts Wednesday, Tenneco — which also makes
automotive ride control products — boosted the estimate for its market
for commercial-vehicle emissions control after-treatment to $8 billion
from previous expectations of $5 billion to $6 billion.
KeyBanc analyst Brett Hoselton said that could translate into higher sales for the company as global emissions standards get tougher and it releases new products and gains market share. The firm added that the company’s prior revenue growth forecast may prove to be conservative.
In early afternoon trading, Tenneco shares were up more than 12 percent, to $22.45, more than doubling in the last 12 months and up 26 percent year-to-date.
A representative from Tenneco wasn’t immediately available to comment.
J.P. Morgan analyst Himanshu Patel noted that the $8 billion figure “materially improves our estimate of long-term EPS power.” He raised his projection to the low-$6 range from $5, and said it appears the increase by Tenneco was partly driven by higher industry volume assumptions, as well as greater definition around the off-highway opportunity.
In early 2009, Tenneco looked at bankruptcy as losses piled up, revenue shrank and nervous investors pushed the company’s share price below 70 cents. After drastic cost-cutting moves, Tenneco and other auto-parts suppliers began seeing glimpses of recovery last year. In April, Tenneco reported another profitable quarter and wrung costs from its operations, and its shares have been steadily rising.
Its products — such as manifolds, filter systems and catalytic reduction — are designed to reduce automotive emissions, making it a leader in the sector. These parts are expected to grow in demand as governments implement stricter emission standards.
J.P. Morgan’s Patel said Tenneco also reported that Deere & Co. (DE) chose it as an emissions after-treatment supplier, giving Tenneco its third major commercial-vehicle emissions customer.
