UPDATE: Goldman Sachs Downgrades Tenneco to Buy, Reiterates $42 PT
In a report published Friday, Goldman Sachs Group downgraded its rating on Tenneco (NYSE: TEN) from Conviction Buy to Buy, and reiterated its $42.00 price target.
Goldman Sachs noted, “The primary reason for the downgrade is our expectation for further downward estimate revisions in 1H13 driven by destocking in the global off-highway market. Of particular concern are near-term production plans for CAT where our machinery team expects $2.8bn of destock in 4Q12-1H13. While we expect commercial vehicle content to continue to grow, production cuts have already brought the run rate of commercial vehicle sales to an estimated $188mn for 4Q12 (TEN's revised $820mn full-year guidance minus the $632mn YTD) which would suggest down sales in the segment next year at the current pace. We don't expect this to happen, as we expect to move past production cuts in 2H13. Moreover, TEN is still seeing important incremental revenue opportunities from Brazil and possibly China as well as remaining US T4i and European Stage 3B content tailwinds. But that still leaves TEN with a difficult 1H13, which will be exacerbated by production cuts on the light side as well - and even giving it credit for good cost performance we find ourselves 12% and 3% below consensus for 1Q13 and 2Q13 EPS.”
Tenneco closed on Thursday at $35.71.
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