Cooper Tire Earnings & Revs Miss Ests

Zacks

Cooper Tire & Rubber Co. (CTB) posted break-even earnings in the third quarter of 2013, down 33% from $1.17 per share in the prior-year quarter. The results lagged the Zacks Consensus Estimate of 54 cents by a substantial margin. Net loss amounted to $0.17 million as against net income of $74 million in the third quarter of 2012.

Revenues of Cooper Tire fell 24% year over year to $832 million in the quarter, missing the Zacks Consensus Estimate of $833 million.

Operating profit declined to $27.9 million (3.4% of sales) from $129.6 million (11.8%) a year ago. Operating profit in the quarter includes a loss of $29 million related to the strike by workers at Cooper Tire’s Chinese joint venture, costs of $5 million related to the terminated merger agreement with Apollo Tyres Ltd., unfavorable pricing and mix of $76 million, partially offset by a gain of $36 million from lower raw materials costs. Lower unit volumes, increased competition and higher manufacturing costs also affected the results.

Segment Details

The North American Tire Operations recorded a 22.5% decline in revenues to $633 million. Operating profit in the segment declined to $38.8 million from $104.8 million in the third quarter of 2012.

The International Tire Operations posted a 35.7% decline in revenues to $264.5 million. Operating profit fell 91.3% to $3.1 million from $35.5 million a year ago.

Financial Position

Cooper Tire had cash and cash equivalents of $309.8 million as of Sep 30, 2013, up from $271.5 million in the corresponding year-ago quarter end. Long-term debt was $344.3 million as of Sep 30, 2013, translating into a long-term debt-to-capitalization ratio of 25.1%. This compares with $339 million or 27.9% as of Sep 30, 2012.

Outlook

Cooper Tire expects raw material costs to decline sequentially by 1.3% in the fourth quarter of 2013. For 2013, capital expenditures are expected between $180 million and $190 million. The company expects to report cash and cash equivalents of about $400 million as of Dec 31, 2013.

Cooper Tire & Rubber Company currently carries a Zacks Rank #3 (Hold). Other stocks that are performing well in the industry are Allison Transmission Holdings, Inc. (ALSN), STRATTEC Security Corporation (STRT) and Gentex Corp. (GNTX). Allison Transmission and STRATTEC carry a Zacks Rank #1 (Strong Buy) while Gentex Corp. has a Zacks Rank #2 (Buy).

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