Earnings estimates for
Cooper Tire & Rubber Co.
(
CTB
) have been climbing since its strong first-quarter results,
announced on May 2. The replacement tire maker has a solid dividend
yield of 2.4% and is expected to deliver healthy double-digit
earnings growth this year and beyond. The Zacks #2 Rank (Buy) stock
also has a decent valuation.
A Strong First Quarter
Cooper Tire & Rubber's first-quarter 2012 results included a
38% year-over-year surge in profit to $21.6 million or 34 cents per
share, representing the 11th consecutive quarter of profitability.
The result surpassed the Zacks Consensus Estimate by a couple of
cents, marking the fourth positive surprise over the last seven
quarters.
Revenues climbed 9% year-over-year to $984 million on the heels of
improved pricing and sales from the core North American operation.
The positives neutralized the impact of higher raw material costs.
The company saw an 8% growth in its North American Tire division
while its International Tire unit grew 11%. The company continues
to witness strong performances from its Roadmaster brand,
manifested by higher shipments.
Cooper believes stabilizing raw material costs, flexible
manufacturing operations, profitable investments and competitive
labor agreements will help it improve results moving ahead despite
of the headwinds faced by the industry.
Estimates Climbing
The Zacks Consensus Estimates for CTB show healthy year-over-year
growth potential. The company's efforts to stem raw material
inflation through improved product and price mix, better product
management, capacity enhancement and cost containment initiatives
should help it sustain the earnings momentum.
For both 2012 and 2013, two out of 6 estimates have been revised
higher in the last 30 days. The Zacks Consensus Estimate for 2012
has climbed 5% and 12% over the last 30 days and 60 days,
respectively, to $2.25 a share, indicating an estimated annualized
growth of roughly 88%. For 2013, the Zacks Consensus Estimate rose
by 4% and 6%, respectively, over the same timeframes to $2.65 per
share, representing a projected year over year growth of nearly
18%.
Stable Dividend
Cooper last raised its quarterly dividend (by a penny) in September
1998 to 10.5 cents per share and has been consistently paying the
same amount ever since then. The company recently declared its
161st consecutive quarterly dividend, affirming a solid yield of
2.4%.
Decent Valuation
Cooper's valuation looks reasonable with its shares trading at a
forward P/E of 7.46x, on par with the peer group average. The
price-to-book of 1.43x is below the peer group average of 1.48x.
Moreover, Cooper has a 1-year ROE of 13.7%, in line with its peer
group average.
Chart Looks Promising
The price and consensus chart demonstrates that the stock has
traced the growth in earnings estimates of late after rallying
above the earnings estimate lines from mid-2009 to mid-2011. As the
earnings estimates moves higher, the stock is likely to follow
suit.
The Bottom Line
Cooper is strongly placed to leverage the growing demand for
replacement tires in the high performance and ultra-high
performance categories. With a solid growth trajectory, rising
earnings estimates, healthy dividend yield and reasonable
valuation, the stock has plenty to interest investors seeking
growth and income.
Founded in 1913, Cooper Tire & Rubber Co. makes tires and
related products for passenger vehicles and light trucks. The
company, which has a market cap of $1.05 billion, has more than 60
manufacturing, sales, distribution, technical and design facilities
located in 10 countries across the globe. Cooper is the ninth
largest tire company in the world and is also one of the 350 large
companies in America.
COOPER TIRE (CTB): Free Stock Analysis Report
COOPER TIRE (CTB): Free Stock Analysis Report
To read this article on Zacks.com click here.