A month has gone by since the last earnings report for Cooper Tire & Rubber Company CTB . Shares have added about 14.2% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Cooper Tire Beats Q4 Earnings, Raises Repurchase Plan
Cooper Tire & Rubber's reported earnings of $1.28 per share in the fourth quarter of 2016 topped the Zacks Consensus Estimate of $0.93. Moreover, earnings were higher than $1.04 per share recorded in the year-ago quarter. Reported net income amounted to $69.3 million compared with $59.2 million in the fourth quarter of 2015.
Cooper Tire reported revenues of $784 million in the quarter that surpassed the Zacks Consensus Estimate of $767 million as well as the year-ago figure of $775.5 million. Revenues improved on an increase in unit volume, partly offset by the adverse impact of price and mix as well as currency headwinds.
Operating profit was $105 million (13.4% of sales) in fourth quarter of 2016 compared with $103 million (13.2% of sales) a year ago. Operating profit was positively impacted by favorable selling, general and administrative (SG&A) costs, higher volumes and lower product liability costs. This increase was partly offset by unfavorable raw materials costs, higher manufacturing charges and an increase in other costs.
The company's shares gained 7.7% to close at $40.60 on Feb 17, reflecting the better-than-expected results in the fourth quarter. Full-Year 2016
Cooper Tire reported adjusted earnings of $4.66 per share in 2016 that topped the Zacks Consensus Estimate of $4.30. Moreover, earnings were higher than $3.69 recorded in the year-ago quarter. Reported net income amounted to $248 million (or $4.55 per share) compared with $213 million in 2015.
Cooper Tire reported revenues of $2.92 billion that surpassed the Zacks Consensus Estimate of $2.91 billion. However, revenues fell from the year-ago figure of $2.97 billion. Revenues were positively impacted by higher unit sales which were more than offset by unfavorable price and mix along with currency headwinds. Segment Details
Americas Tire Operations recorded a 2.4% decrease in revenues to $694 million due to unfavorable price and mix and negative foreign currency impact, partly offset by higher unit volume. Operating profit in the segment declined 4.6% to $116 million while the operating margin deteriorated from 17.1% to 16.8% in the quarter. Operating profits declined due to higher manufacturing costs, unfavorable price and mix as well as higher other costs, partially offset by improvement in SG&A costs.
International Tire Operations reported a 23% rise in revenues to $124 million, mainly buoyed by higher unit volume and favorable price and mix, partially offset by negative foreign currency impact. Operating profit amounted to $1 million, as against an operating loss of $7 million recorded a year ago. The improvement was backed by favorable raw material costs and higher unit volume, partly offset by higher SG&A and other costs. Financial Position
Cooper Tire had cash and cash equivalents of $504.4 million as of Dec 31, 2016, down from $505.2 million as of Dec 31, 2015. Long-term debt was $297.1 million as of Dec 31, 2016, compared with $296.4 million as of Dec 31, 2015.
In full-year 2016, Cooper Tire had cash flow of $309.8 million from operating activities compared with $300.3 million in 2015. Capital expenditures decreased to $175 million in the fourth quarter of 2016 from $54 million a year ago. Share Repurchases
In Feb 2016, Cooper Tire authorized the repurchase of shares worth up to $200 million. During the fourth quarter of 2016, the company bought back 678,155 shares for $25.5 million. In full-year 2016, the company repurchased 3,127,527 shares for $108 million.
From Jan 1 through Feb 14, 2017, Cooper Tire repurchased another 330,277 shares for $12.1 million. Since the company started repurchasing shares in Aug 2014, a total of 12.6 million shares at an average price of $34.15 per share have been bought back.
Cooper Tire's board has increased and extended its repurchase program by $300 million until Dec 31, 2019. This authorization will replace the earlier program that had $98 million remaining. Outlook
Cooper Tire expects operating margin at the high end of the previously announced mid-term target of 8% to 10%. The first half of the year is expected to see margins at the low end of the guidance, with the figure likely to exceed 10% in the second half. The International Tire Operations segment is expected to improve operating profit this year, including its recent acquisition of GRT in China.
For 2017, capital expenditures are expected between $220 million and $250 million. The effective tax rate for the year is expected at around 30−33%.
Cooper Tire expects raw material costs to increase 25% year over year in the first half of 2017 along with slight sequential increase in the rest of the year. The company expects global unit volumes from each of its segments to increase in 2017.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter. In the past month, the consensus estimate has shifted lower by 21.17% due to these changes.
Cooper Tire & Rubber Company Price and Consensus
Cooper Tire & Rubber Company Price and Consensus | Cooper Tire & Rubber Company Quote
At this time, Cooper Tire & Rubber's stock has a strong Growth Score of 'A', though it is lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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