Cooper Tire & Rubber Company (CTB) reported nearly a threefold increase in earnings to $1.15 per share in the fourth quarter of 2012 from 51 cents in the same quarter of 2011. With this, the company topped the Zacks Consensus Estimate by as much as 30 cents per share. Net earnings more than doubled to $73 million from $32 million in the fourth quarter of 2011.
Earnings in the quarter were positively affected by lower raw material costs of $101 million, manufacturing efficiencies of $9 million, volume increases of $5 million and lower product liability costs of $2 million. These were partially offset by $25 million in unfavorable price and mix, and $20 million in increased selling, general and administrative expenses as the company continued to invest in expanding distribution networks and promoting its brands.
Revenues edged up 2% to $1.1 billion during the quarter. The increase was attributable to higher volumes in the truck-bus radial tire segment, new product launches and, to some extent, volume growth generated from the acquisition of tire manufacturing assets in Serbia. Operating profit more than doubled to $124.2 million (11.7% of sales) from $59.7 million (5.7%) a year ago.
The North American Tire Operations recorded a 5% rise in revenues to $811.0 million. The increase in sales was attributable to increased unit sales (2%) and higher price and mix. The company’s total light vehicle tire shipments in the U.S. were nearly flat during the quarter on a year-over-year basis. Rubber Manufacturers Association (:RMA) member shipments declined 3% and total industry shipments (that includes an estimate for non-RMA members) increased 2% during the quarter.
Operating profits in the segment nearly tripled to $103.2 million (12.7% of net sales) from $34.9 million (4.5%) in the fourth quarter of 2011. This increase was attributable to a $51 million decrease in raw material costs, $19 million in improved price and mix, $10 million due to manufacturing efficiencies and $3 million due to higher unit volumes These were partially offset by $11 million of higher selling, general and administrative expense and $6 million of “other” costs related to pension and incentive compensation.
The International Tire Operations posted a 9% decline in revenues to $341.6 million. The decline was caused by lower pricing and mix of $62 million that more than offset the impact of higher unit volumes of $25 million and favorable currency translation of $2 million.
Operating profits upped 10.3% to $32.2 million (9.4% of net sales) compared with $28.9 million (7.7%) a year ago. The improvement was attributable to lower raw material costs of $67 million and higher unit volumes of $2 million, offset partially by unfavorable price and mix of $63 million and higher selling, general and administrative expenses of $2 million.
For full year 2012, Cooper Tire’s profit per share declined 13.2% to $3.49 from $4.02 in 2011. However, it was higher than the Zacks Consensus Estimate of $3.09. Net sales escalated 7.5% to $4.2 billion during the year.
Cooper Tire had cash and cash equivalents of $351.8 million as of De 31, 2012, up from $233.7 million in the corresponding quarter-end a year-ago. Long-term debt stood at $338.5 million as of the above date, translating into a long-term debt-to-capitalization ratio of 27.1%. This compared with $350.7 million or 33.4% as of Dec 31, 2011.
Cooper Tire & Rubber Company, a Zacks Rank #4 (Sell) stock, believes stabilizing raw material costs, flexible manufacturing operations, profitable investments, and competitive labor agreements will help the company improve results despite headwinds facing the industry.
Cooper Tire’s competitor, Goodyear Tire & Rubber Company (GT) reported a profit of $97 million or 39 cents per share in the fourth quarter of 2012 that significantly rose from $6 million or 3 cents in the same quarter of 2011 (all excluding special items). With this, the company has beaten the Zacks Consensus Estimate of 21 cents per share. Including special items, the tire maker had a breakeven 2012-fourth quarter, which compared with a profit of $18 million or 7 cents per share in the 2011 quarter.
While we like to avoid Goodyear, stocks that are worth looking for in the same industry include Continental AG (CTTAY) and Oshkosh Corporation (OSK). They carry a Zacks Rank #1 (Strong Buy).
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