Cooper Tire (CTB) Earnings Miss Estimates in Q2, Improve Y/Y

Zacks Equity Research
August 8, 2014

Cooper Tire & Rubber Co.’s (CTB) earnings in the second quarter of 2014 increased to 59 cents from 55 cents per share in the prior-year quarter. However, the figure lagged the Zacks Consensus Estimate of 80 cents. Net income amounted to $38 million as against $35 million in the second quarter of 2013.

Revenues of Cooper Tire improved 1% year over year to $889 million in the quarter, beating the Zacks Consensus Estimate of $870 million.

Operating profit increased to $77 million (8.6% of sales) from $69 million (7.8% of sales) a year ago.

Segment Details

The North American Tire Operations recorded a 3% increase in revenues to $639 million. Operating profit in the segment improved to $65 million (10.1% of sales) from $59 million (9.5% of sales) in the second quarter of 2013, driven by favorable raw material costs, higher unit volumes and manufacturing cost efficiencies, which offset the unfavorable price and mix.

The International Tire Operations posted an 8% fall in revenues to $327 million. Operating profit dropped to $26 million (8.1% of sales) from $29 million (8.3% of sales) a year ago due to lower price and mix.

Financial Position

Cooper Tire had cash and cash equivalents of $327 million as of Jun 30, 2014, up from $244 million in the corresponding year-ago quarter end. Long-term debt was $341.9 million as of Jun 30, 2014, translating into a long-term debt-to-capitalization ratio of 24.6% against $348.1 million of debt and long-term debt-to-capitalization ratio of 28.8% as of Jun 30, 2013.

Outlook

Cooper Tire expects raw material costs to remain flat sequentially in the third quarter of 2014. In the long run, raw material costs are expected to increase. For 2014, capital expenditures are expected between $175 million and $185 million.

At present, Cooper Tire carries a Zacks Rank #2 (Buy). Investors interested in the automobile sector could also consider stocks like Tesla Motors, Inc. (TSLA), STRATTEC Security Corporation (STRT) and Visteon Corporation (VC). All these stocks sport a Zacks Rank #1 (Strong Buy).

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