Cooper Tire Shares Up Driven by Long-Term Plans


Shares of Cooper Tire & Rubber Co. (CTB) gained 1.3% to close at $28.17 on May 15, after the company revealed its long-term goal and strategies on its Investor Day. The tire manufacturer aims to attain operating profit over 10% and net sales of $5–$6 billion per annum in the long term.

Meanwhile, Cooper Tire plans to maintain a sustained annual operating profit of 8–10%. The company had operating profit of 10.2%, higher than the targeted range, in the first quarter of 2014.

Apart from these financial targets, Cooper Tire is also working on deciding the future ownership of its Chinese joint venture, Cooper Chengshan (Shandong) Tire Company Ltd. (CCT.TO). This is important as the company’s financial plans and targets will be affected by the ownership of CCT. However, the company said that China will remain an important growth market for it, even if it loses its share in CCT.

Cooper Tire will also work on improving the manufacturing cost structure. The company reduced its manufacturing costs by 16% from 2008 to 2012 and plans to reduce it further by 14% by 2017 through increased automation in production facilities and consolidation of product family.

Cooper Tire plans to cut down the number of global product families by 60% by the end of the decade. This will lead to simplification of the manufacturing process, lower costs, higher sourcing flexibility and faster product development.

Cooper Tire will launch a record number of tires this year, one of them being the CS5 Touring, an innovative premium passenger car tire. The company also plans to boost cash generation to facilitate business and other investments.

In the North American Segment, Cooper Tire aims to improve margin and mix on the back of sales growth, product launches, capacity conversion to focus on premium products and expansion in markets with relatively low penetration. The company also plans to increase manufacturing in Mexico and boost sales in key Latin American markets.

In the International Segment, Cooper Tire aims to enhance sales, so that it can generate half of the company’s global revenues. The company plans to rapidly launch products, expand distribution network and increase the original equipment business in China to boost sales. The company will focus on profit enhancement in Western Europe.

Cooper Tire currently carries a Zacks Rank #1 (Strong Buy). Some better-ranked automobile stocks worth considering are Fox Factory Holding Corp (FOXF), Tata Motors Ltd. (TTM) and Fuji Heavy Industries Ltd. (FUJHY). Fox Factory carries a Zacks Rank #1, while Fuji and Tata Motors are Zacks Rank #2 (Buy) stocks.

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