Outperform Maintained for BWA/TEN

BorgWarner Inc. (NYSE: BWA) and Tenneco Inc. (NYSE: TEN) are currently rated by Wells Fargo as follows:

"The Class 5-8 truck recovery should provide a material yr/yr benefit to BWA's and TEN's earnings in 2011. Specifically, we estimate the Class 5-8 truck recovery could add $0.15-0.20 in EPS for BWA (6-7% of our 2010E EPS) and $0.30-0.40 in EPS for TEN (21-28% of our 2010E EPS). Our analysis excludes any benefit from higher off-road vehicle production and content growth and incremental non-NA commercial OEM business and volume (specifically China). Also, for TEN, our analysis excludes yr/yr growth in commercial OEM ride control revenues driven by higher volumes. Both names are well positioned to substantially exceed underlying light vehicle production growth trends over the next few years, in our opinion. As such, we reiterate our Outperform ratings on BWA and TEN."

Wells Fargo estimates are currently: "[for] TEN, we estimate every 10,000 unit increase in Class 4-8 volume adds $0.01-0.02 in EPS. Contribution margin and CPV are key variables that affect our sensitivity. For BWA, we estimate a 417,000 build in 2011 would drive $0.21 of incremental EPS (+$0.05 in EPS versus our base analysis)."

BorgWarner Inc. closed yesterday at $47.65.
Tenneco Inc. closed yesterday at $27.08.

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