J.P. Morgan Neutral On Tenneco Automotive

J.P. Morgan Chase & Co. is out with a research report on Tenneco Automotive TEN and it has a Neutral rating and a $55 price target on shares. In a note to clients, J.P. Morgan Chase & Co. writes, "Despite a 2Q beat, TEN's stock price fell 3% intraday Friday (vs. S&P 500 decline of 1%) likely due to weak operating leverage in nearly all non-NA regions. The company did provide specific reasons for the various drags on contribution margins, but it appears most are multi-quarter fixes. With TEN having provided annual OE revenue guidance through mid-decade several quarters ago, the revenue portion of TEN's story is no longer the intriguing mystery it was two years ago. But there is still intrigue on margin potential as the business mix evolves more towards higher margin CV. The latest quarter does not inspire margin optimism, but we leave our margin expansion forecast largely unchanged (+80bps 2011-2013 to 6.2%) reflecting confidence in the operating team's ability to tackle near-term issues. Separately, we are impressed with the company's new CV business disclosures. We tweak our 2011 EPS up $0.05 to $2.80, largely due to the 2Q beat. Maintain Neutral rating due to current valuation but would look to become more constructive on pullbacks." Shares of TEN lost $1.42 yesterday to close at $39.94 on Friday.