On May 20, 2014, we issued an updated research report on Cooper Tire & Rubber Co. (CTB). The company reported positive earning surprises in the last two quarters, rebounding from the negative surprises in the previous two quarters.
Earnings in the first quarter of 2014 fell considerably to 71 cents from 87 cents per share in the prior-year quarter. However, the figure significantly surpassed the Zacks Consensus Estimate of 49 cents.
Revenues of Cooper Tire declined 7.6% year over year to $796 million in the quarter, lagging the Zacks Consensus Estimate of $832 million.
The company is still dealing with the impact of the terminated merger agreement with Apollo Tyres. It incurred significant losses in the second half of 2013 related to the worker strike at the Chinese joint venture in protest of the merger agreement as well as the termination of the agreement.
However, Cooper Tire is focusing on improving its business operations. The company plans to launch a record number of tires this year.
Cooper Tire aims to attain operating profit over 10% and net sales of $5–$6 billion per annum in the long term. The company also plans to reduce its manufacturing costs by 14% by 2017 through increased automation in production facilities and consolidation of product family. It plans to cut down the number of global product families by 60% by 2020. This will lead to simplification of the manufacturing process, lower costs, higher sourcing flexibility and faster product development.
Moreover, all three analysts covering Cooper Tires raised their earnings estimates for 2014 and 2015 in the last 30 days. This resulted in a 20.6% surge in the Zacks Consensus Estimate for 2014 to $2.63 per share, reflecting an estimated year-over-year improvement of about 52.02%. Cooper Tire currently carries a Zacks Rank #1 (Strong Buy).
Key Picks from the Sector
Some other automobile stocks worth considering are Fox Factory Holding Corp (FOXF), Tata Motors Limited (TTM) and Fuji Heavy Industries Ltd. (FUJHY). Fox Factory and Tata Motors carry a Zacks Rank #1, while Fuji is a Zacks Rank #2 (Buy) stock.