Lear Corporation (NYSE: LEA) and Tenneco (NYSE:TEN) are both mid-cap auto/tires/trucks companies, but which is the better investment? We will compare the two companies based on the strength of their institutional ownership, valuation, dividends, analyst recommendations, risk, profitabiliy and earnings.

Analyst Recommendations

This is a summary of recent ratings and target prices for Lear Corporation and Tenneco, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Lear Corporation 3 3 4 0 2.10
Tenneco 1 4 4 0 2.33

Lear Corporation presently has a consensus target price of $147.60, suggesting a potential upside of 1.10%. Tenneco has a consensus target price of $66.63, suggesting a potential upside of 23.38%. Given Tenneco’s stronger consensus rating and higher probable upside, analysts clearly believe Tenneco is more favorable than Lear Corporation.

Valuation & Earnings

This table compares Lear Corporation and Tenneco’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Lear Corporation $19.29 billion 0.52 $1.97 billion $15.06 9.69
Tenneco $8.86 billion 0.33 $631.00 million $5.07 10.65

Lear Corporation has higher revenue and earnings than Tenneco. Lear Corporation is trading at a lower price-to-earnings ratio than Tenneco, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

97.6% of Lear Corporation shares are held by institutional investors. Comparatively, 96.5% of Tenneco shares are held by institutional investors. 0.5% of Lear Corporation shares are held by insiders. Comparatively, 2.7% of Tenneco shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Risk & Volatility

Lear Corporation has a beta of 1.32, meaning that its share price is 32% more volatile than the S&P 500. Comparatively, Tenneco has a beta of 1.79, meaning that its share price is 79% more volatile than the S&P 500.

Profitability

This table compares Lear Corporation and Tenneco’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Lear Corporation 5.51% 32.34% 10.51%
Tenneco 3.17% 53.67% 8.14%

Dividends

Lear Corporation pays an annual dividend of $2.00 per share and has a dividend yield of 1.4%. Tenneco pays an annual dividend of $1.00 per share and has a dividend yield of 1.9%. Lear Corporation pays out 13.3% of its earnings in the form of a dividend. Tenneco pays out 19.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Tenneco has raised its dividend for 6 consecutive years. Tenneco is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Lear Corporation beats Tenneco on 9 of the 16 factors compared between the two stocks.

Lear Corporation Company Profile

Lear Corporation (Lear) is a supplier to the global automotive industry. The Company is engaged in supplying seating, electrical distribution systems and electronic modules, as well as related sub-systems, components and software, to automotive manufacturers. The Company’s segments include Seating and E-Systems. The Company serves the automotive and light truck market. The Seating segment consists of the design, development, engineering, just-in-time assembly and delivery of complete seat systems, as well as the design, development, engineering and manufacture of all seat components, including seat covers and surface materials, such as leather and fabric, seat structures and mechanisms, seat foam and headrests. The E-Systems segment consists of the design, development, engineering, manufacture, assembly and supply of electrical distribution systems, electronic modules and related components and software for light vehicles across the world.

Tenneco Company Profile

Tenneco Inc. is a producer of clean air and ride performance products and systems for light vehicle, commercial truck, off-highway and other vehicle applications. The Company designs, manufactures and distributes highly engineered products for both original equipment vehicle manufacturers (OEMs) and the repair and replacement markets, or aftermarket, across the world. The Company operates through six segments: North America Clean Air; North America Ride Performance; Europe, South America and India Clean Air; Europe, South America and India Ride Performance; Asia Pacific Clean Air, and Asia Pacific Ride Performance. The Company serves both original equipment (OE) vehicle designers and manufacturers and the repair and replacement markets, or aftermarket, globally through brands, including Monroe, Rancho, Clevite Elastomers, Axios, Kinetic and Fric-Rot ride performance products and Walker, XNOx, Fonos, DynoMax and Thrush clean air products.

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