On Jul 4, we maintained our Neutral recommendation on
Cooper Tire & Rubber Company
). We are pleased with its improved 2013-first quarter results
and focus on reducing costs together with increased efficiency in
each of the plants. However, we are concerned about the
increasingly competitive landscape.
Why the Reiteration?
On May 9, Cooper Tire reported earnings of 87 cents per share in
the first quarter of 2013 that more than doubled from 34 cents in
the prior-year quarter. With this, the company topped the Zacks
Consensus Estimate by a substantial margin of 21 cents per share.
However, revenues went down 12.5% to $861.7 million during the
quarter, missing the Zacks Consensus Estimate of $971.0 million.
The quarter recorded decline in volumes due to deployment of a
major phase of ERP system and inventory adjustments by certain
key customers. In addition, the soft global tire market and
continuous weakness in the world economy marred consumer
Following the release of the first quarter results, the Zacks
Consensus Estimate for 2013 increased 0.3% to $3.48 per share.
The Zacks Consensus Estimate for 2014 also went up 0.6% to $3.60
per share. Currently, Cooper Tire carries a Zacks Rank #3 (Hold).
Cooper Tire will benefit from its focus on developing and
improving high-performance products, which will meet the rising
market demand. It is also working constantly to increase its
capacity and has outsourced the production of tires to
manufacturers in low-cost countries such as China, India and
In addition, Cooper Tire's initiative to improve product and
price mix will offset the rise in raw material costs. The company
also focuses on increasing the efficiency of the U.S. based
plants in order to capture a better competitive position.
However, we are concerned about the increasingly competitive
industry. Cooper Tire competes with Bridgestone Corporation in
Goodyear Tire & Rubber Company
) in the U.S. and Groupe Michelin in France. The peers occupy a
significant market position, where Cooper Tire occupies only 15%
market share in light vehicle replacement tires in the U.S.
Other Stocks to Consider
Some stocks that are performing well in the broader industry
where Cooper Tire operates include
Magna International Inc.
). Both carry a Zacks Rank #1 (Strong Buy).
COOPER TIRE (CTB): Free Stock Analysis Report
GOODYEAR TIRE (GT): Free Stock Analysis
MAGNA INTL CL A (MGA): Free Stock Analysis
VISTEON CORP (VC): Free Stock Analysis Report
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