Earnings momentum for
Cooper Tire & Rubber Co.
) has been on the rise since this replacement tire maker reported
upbeat second-quarter 2012 results, announced on August 9. The
company reported a 64% surprise in the quarter. Furthermore, on
September 7, 2012, CTB set a new 52-week high.
This Zacks #2 Rank (Buy) offers a decent dividend yield of 1.9% and
is expected to deliver robust double-digit earnings growth in 2012,
leveraging its favorable position in the industry, strength in its
product portfolio and a strong demand environment.
Helped by lower raw material costs, Cooper Tire & Rubber
announced that profit grew more than four-fold year over year in
the second quarter to roughly $52 million, representing the 12th
straight quarter of profitability. Earnings of 82 cents per share
trounced the Zacks Consensus Estimate by 32 cents. Other positive
factors impacting bottom line growth included higher sales volumes,
improved manufacturing efficiencies and lower product liability
Revenues advanced 15% year over year to $1.06 billion, buoyed by
higher sales volumes in the North American and International
operations. Sales in its North American Tire division grew 16%
while its International Tire unit advanced 6%. It also registered
record operating profit for both divisions. Total light vehicle
tire shipments jumped 16% in the U.S.
Cooper Tire & Rubber believes product innovations, cost
reduction measures, declining raw material costs and profitable
investments will help boost results moving ahead, despite the
headwinds in the tire industry.
Earnings Estimates Climbing High
For 2012, five of 6 estimates have been revised higher in the last
30 days, which has raised the Zacks Consensus Estimate for 2012 by
10% to $2.48 per share. This outlook indicates an estimated
annualized growth of roughly 107%.
For 2013, four of 6 estimates moved higher in the same timeframe,
along with one downward revision. The Zacks Consensus Estimate for
2013 has climbed 6% to $2.81 per share, representing a projected
year over year growth of around 13%.
Steady Dividend Stream
Cooper Tire & Rubber raised its quarterly dividend by a penny
to 10.5 cents per share back in September 1998 and has been
consistently paying the same amount ever since then. On August 8,
the company declared its 162nd consecutive quarterly dividend,
affirming a yield of 1.9%.
Cooper Tire & Rubber's valuation looks reasonable with shares
trading at a forward P/E of 8.87x, essentially in line with the
peer group average of 8.86x. The price-to-book of 1.74x is below
the peer group average of 1.95x. Moreover, the price-to-sales of
0.33x is lower than the peer group average of 0.49x.
A Peek at the Chart
Shares of Cooper Tire & Rubber have soared roughly 52%
year-to-date. The stock bounced back sharply from as low as $3 in
March 2009 to $22 as of September 7, 2012. Strong second quarter
results contributed to the stock's recent rally.
The gap between the estimate lines for 2011, 2012 and 2013, as
reflected in the price and consensus chart below, should enthuse
investors. As earnings estimates move higher, the stock is likely
to follow suit.
Cooper Tire & Rubber should be able to sustain its earnings
momentum give its improved product and price mix, better product
management, capacity enhancement and cost containment initiatives.
The company is poised to leverage the growing demand for
replacement tires in the high performance and ultra-high
performance categories. With a healthy growth trajectory, rising
earnings estimates, safe dividend yield and decent valuation,
Cooper Tire & Rubber is a compelling pick for 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 $1.37 billion, has more than 60
manufacturing, sales, distribution, technical and design facilities
located in 10 countries across the globe. It is the ninth largest
tire company in the world (fourth largest in the U.S.) and is also
one of the 350 large companies in America.
COOPER TIRE (CTB): Free Stock Analysis Report
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