Cooper Tire & Rubber Company
) reported a profit of $74.1 million or $1.17 per share in the
third quarter of 2012, up significantly from $17.3 million or 27
cents in the year-ago quarter. Earnings per share in the quarter
trounced the Zacks Consensus Estimate by 30 cents.
COOPER TIRE (CTB): Free Stock Analysis Report
GOODYEAR TIRE (GT): Free Stock Analysis
To read this article on Zacks.com click here.
The year-over-year growth was attributable to a $144.0 million
reduction in raw material costs as well as higher sales volumes
and improved manufacturing efficiencies, which contributed $9.0
million and $7.0 million, respectively to the earnings growth.
However, these were partially offset by unfavorable price and mix
for $36 million and a 67.7% increase in selling, general and
administrative expenses (SG&A) to $68.6 million due to a rise
in incentive compensation costs on the back of higher profits.
The company's revenues increased 4.5% year over year to $1.10
billion in the quarter, but marginally fell short of the Zacks
Consensus Estimate of $1.11 billion. The increase was due to
higher revenues from North America, partially offset by a decline
in revenues from the International segment.
Cost of goods sold fell 6.6% to $897.5 million from $960.5
million a year ago. As a result, gross profit increased
significantly to $198.2 million from $88.1 million in the third
quarter of 2011. Gross margin was 18.1% compared with 8.4% in the
year-ago quarter. Operating income more than doubled to $129.6
million from $47.2 million, while operating margin was 11.8%
versus 4.5% in the prior year.
North America Tire Operations
rose 7.4% to $816.3 million, driven by higher sales volumes (4%)
and strong price and mix. According to Rubber Manufacturers
Association, total light vehicle tire shipments by the company in
the U.S. increased 6% compared to a 3% decline in total industry
Operating profit jumped to $104.8 million from $17.3 million in
the year-ago quarter. The year-over-year improvement was due to
decline in raw material costs of $102.0 million, higher unit
volumes of $6 million and manufacturing efficiencies of $9
million, partially offset by higher SG&A costs of $14
International Tire Operations
declined 2.5% to $411.3 million due to adverse impacts of price
and mix for $60 million, offset by positive impacts from increase
in unit volumes of $45 million and currency translation of $4
Operating profit in the segment went up 16.6% to $35.5 million
from $30.4 million a year ago. The year-over-year improvement was
driven by lower raw material costs of $64 million and higher unit
volumes of $3 million. These were partially offset by unfavorable
price and mix of $53 million and higher SG&A of $7 million,
due to investments on expansion of distribution network in China
and higher promotional costs.
Cooper Tire had cash and cash equivalents of $271.5 million as of
September 30, 2012, up from $90.6 million as of September 30,
2011. Long-term debt stood at $338.9 million as of September 30,
2012 compared with $356.1 million as of September 30, 2011.
Long-term debt to capitalization ratio improved to 27.9% as of
September 30, 2012 from 40.8% as of September 30, 2011.
The company believes that raw material prices will remain flat in
the fourth quarter compared to the third quarter of 2012. Capital
expenditures for 2012 will be in the range of $180 million to
$210 million, due to the company's investment in Enterprise
Resource Planning (ERP) system and Serbian operations.
Headquartered in Findlay, Ohio, Cooper Tire & Rubber Company
engages in design, manufacturing, marketing, and sales of
passenger car and light truck tires. The company competes with
Goodyear Tire & Rubber Company
) and maintains a Zacks #1 Rank, which translates into a
Strong-Buy rating for the short term (1 to 3 months).