Will This Downgrade Hurt Tenneco (TEN) Stock Today?

NEW YORK (TheStreet) -- Tenneco Inc. (TEN) was downgraded to "hold" from "buy" at Deutsche Bank (DB) this morning as the firm cited valuation and as it maintains a $66 price target on the shares.

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Separately, TheStreet Ratings team rates TENNECO INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate TENNECO INC (TEN) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • TEN's revenue growth has slightly outpaced the industry average of 3.4%. Since the same quarter one year prior, revenues rose by 10.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, TEN's share price has jumped by 50.31%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • TENNECO INC's earnings per share declined by 14.8% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, TENNECO INC reported lower earnings of $2.97 versus $4.50 in the prior year. This year, the market expects an improvement in earnings ($4.45 versus $2.97).
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Auto Components industry and the overall market, TENNECO INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for TENNECO INC is rather low; currently it is at 16.71%. Regardless of TEN's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 2.19% trails the industry average.
  • You can view the full analysis from the report here: TEN Ratings Report

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