Automotive industry players
reported mediocre results Tuesday and both saw a correspondingly lackluster market reaction.
Ashland reported fourth quarter net income of $137 million, or $1.99 a share, on revenue of $2.2 billion. Analysts polled by First Call had expected the company to earn $1.31, but the upside comes as a result of an $81 million gain on the sale of its Electronic Chemicals group. For the year ended Sept. 30, 2003, the company earned $75 million, or $1.10 a share, compared with net income of $117 million, or $1.67 a share, last year on flat revenue of about $7.5 billion.
While the company is cruising on the strength of its Valvoline unit, which produced sharp increases in operating income, sales volume and care-care services, the company described itself as "disappointed" with the results of its chemical and construction units and continued a cost reduction program to achieve growth in those sectors. The company claimed the loss in the construction unit was partially caused by weather related cost increases and construction delays related to its Virginia Department of Transportation Route 288. The cost-reduction programs now underway will save the company $75 million a year by the end of next year when severance and other costs have been fully absorbed.
At $36.75, the stock is off 2 cents on the day, but up sharply 27% for the year.
Tenneco reported third-quarter net income of $3 million, or 9 cents a share, on revenue of $915 million, versus net income of $5 million, or 13 cents a share, on revenue of $856 million in the year ago period. Analysts had been expecting a profit of 8 cents per share. But had it not been for a favorable 9-cents-a-share tax benefit relating to the filing of 2002 tax returns in during the quarter, the company would have broken even.
Its business, primarily the manufacturing of automotive exhaust systems and shock absorbers, was down in the United States versus the year ago period and offset by modest gains in the European market, allowing the company to show a slight uptick in overall revenue. While the company made no mention of currency benefits in its release, many companies have reported favorable results in the European market this earnings season due to beneficial exchange rates.
The debt-laden company instead stressed that it was able to generate enough cash to reduce bank and bond debt and remain comfortable within debt covenants while it reduces production capacity in what it describes as a tough market. The market has rewarded the company's debt reduction plan sending the stock up over 60% for the year.