When I last wrote about Tenneco (TEN) I said that I saw, “a path to a significantly higher share price” in the mid-teens, but that the execution risks were still high. Not only did Tenneco deliver a very strong first quarter, but it was also one of the few parts suppliers to guide to both higher full-year and second quarter earnings, as Tenneco’s business mix has left it relatively well-shielded from the semiconductor shortages hitting the sector.
I believe Tenneco’s heavy debt load and business mix still merit a higher discount rate than its peer group (which it has smoked in terms of share price performance since my March piece), but the company has definitely bought itself breathing room on the debt issue and showed some impressive operating leverage this quarter. I still think this is a difficult “thread the needle” story, but I can support a cash flow-based fair value in the mid-to-high teens.
Read the full article here:
Tenneco Roars Ahead Of The Pack On Strong Earnings, Guidance, And Build Outgrowth
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