Standard & Poor’s Ratings Services raised its outlook on Tenneco’s (TEN) debt to ‘Positive’ from ‘Negative’ and affirmed its ‘B-’ rating. This was attributed to the company’s better-than-expected results for the second quarter of 2009.
In the second quarter, the manufacturer of pollution and ride control systems for cars reported a net loss of $10 million or 22 cents per share on an adjusted basis, much better than the Zacks Consensus Estimate of a loss of 50 cents per share.
Further, Tenneco delivered its best gross margin performance since the third quarter of 2006. Gross margin was 17.5% during the quarter, an improvement from 16.2% a year back and up from 14.5% in the prior quarter. The gross margin improved, despite a 24% decline in year-over-year revenues, on the back of restructuring savings and cost reductions to offset a portion of the negative impact from lower original equipment production volumes and related manufactured fixed cost absorption.
As of June 30, 2009, Tenneco’s leverage ratio under its senior credit facility was 5.77, below the maximum level of 7.35. The interest coverage ratio of 2.21 was above the minimum level of 1.85.
Standard & Poor’s believed that Tenneco’s efficient cost reduction efforts and restructuring activities would justify its outlook revision.
We maintain our Neutral recommendation on the shares of Tenneco.
Read the full analyst report on “TEN”
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