Sunday, June 3, 2018

Tenneco Hoping That Doubling, Then Halving, Makes 1+1=2+

Like Dana (DAN), Tenneco (TEN) looks like a vehicle supplier that's been pounded down pretty hard, and with the shares down about 25% over the past year, maybe a little too hard. There are some legitimate concerns about margin weakness and the prospect of weaker unit volumes in both the passenger and commercial vehicle businesses, not to mention the company's mixed future in the hybrid/EV world and the risks that will come with integrating Federal Mogul and then splitting the business.

Even so, I think the valuation seems to overstate those risks. It's hard for me to advocate strongly for Tenneco given its not-so-impressive FCF generation over the years, but given the possibility that the merger and split will finally unlock some of the value in Ride Performance and arguably the overly pessimistic market opinion of the Clean Air business, this is a name worth some due diligence.

Keep reading here:
Tenneco Hoping That Doubling, Then Halving, Makes 1+1=2+

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