UPDATE 2-Tenneco posts higher quarterly profit
(Adds analysts comments, updates stock action)
DETROIT, April 24 (Reuters) - Auto parts maker Tenneco Inc (TEN.N) posted a higher quarterly profit on Thursday as growth in Asia and significant profit improvement in Europe offset the weak North American market.
But the company said it expects little change in industry conditions the rest of the year. The maker of emissions and ride control parts such as mufflers and shocks also anticipates automaker production volumes in North America will fall from last year.
Its shares were down 3.5 percent.
Robert W. Baird analyst David Leiker said in a research note that the company's operating results were disappointing due to higher-than-expected research and operating costs. However, he maintained his "outperform" rating due to good long-term prospects.
Lehman Brothers analyst Brian Johnson said in a research report that the profit could be viewed as of "lower quality" as earnings before interest and taxes missed his estimate but that was more than offset by a surprisingly large decrease in interest expense.
Johnson said the company may have benefited from lower interest rates on its variable debt, which makes up a significant portion of its total debt. He has a "neutral" rating on the stock.
The softening economy and tight credit markets have led consumers to put off making large purchases like new cars. Ford Motor Co (F.N) on Thursday cut its 2008 U.S. sales outlook for the year, while larger rival General Motors Corp GM.N the previous day said U.S. industry sales would be weaker in the second quarter from the first.
Tenneco's net income in the first quarter rose to $6 million, or 13 cents a share, compared with $5 million, or 11 cents a share, in the year earlier quarter.
Excluding one-time items, Tenneco earned 20 cents a share, a penny above what analysts polled by Reuters Estimates had expected.
"We faced the most challenging North American industry conditions we have seen in a long time," Tenneco Chief Executive Gregg Sherrill said in a statement, citing the United Auto Workers two-month-old strike at American Axle & Manufacturing Holdings Inc (AXL.N) has forced Tenneco customer GM to idle about 30 plants.
"We took immediate steps to flex down our operations in response to these volume declines," he added.
Revenue in the quarter rose 12 percent from last year to $1.56 billion, above the $1.47 billion analysts had expected, driven by the favorable exchange rates due to the weak U.S. dollar, as well as growth in Asia Pacific and South America.
The Lake Forest, Illinois-based company repeated it expects revenue from sales to automakers to rise by an average annual rate of 11 percent to 13 percent between 2008 and 2012.
Tenneco shares were off 96 cents at $26.28 a share in midday trading on the New York Stock Exchange. (Reporting by Ben Klayman, editing by Dave Zimmerman)
