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Cooper-Standard (CPS) Hurt by Poor Sales and High Costs

Zacks Equity Research

On Aug 12, we issued an updated research report on Cooper-Standard Holdings CPS.

The company deals in manufacturing and selling of sealing, fuel and brake delivery along with fluid transfer and anti-vibration systems. The products are primarily used in light trucks and passenger vehicles. The company operates through four reportable segments — the North America, Europe, Asia Pacific and South America.

In second-quarter 2019, Cooper-Standard’s earnings and revenues missed their respective Zacks Consensus Estimate as well as declined year over year.

Challenging market conditions are impacting the company’s performance. It has witnessed year-over-year decline in sales due to unfavorable volume and mix, volatility in foreign currency as well as the sale of Anti-Vibration Systems (AVS).

Rising commodity prices owing to trade disputes and high tariff costs are other headwinds. If the current tariff rates are to remain the same throughout the year, raw materials costs will hurt the company’s margin by 1.8%. Additionally, other inflation costs that include wages, energy, rent and utility are expected to hamper margin by 1.5% in 2019.

However, the company is on track with its product innovations and new program launches. In the second quarter, the company reported 75% year-over-year increase in new customer program launches. During the quarter, the company also received new contract awards related to product innovations, including new and replacement business. This contributed $171 million to annualized sales. These innovative plans are driving the company to expand opportunities and attract new customers.

Moreover, improved operating efficiency is expected to not only reduce SG&A expenses but also aid cost-saving and lean initiatives. In 2019, the company has managed to take out $52 million of costs in their plants.

In the past six months, Cooper-Standard has underperformed the industry it belongs to. During the same time frame, the company’s shares have plunged 54.4% compared with the industry’s fall of 2.8%.

Zacks Rank & Stocks to Consider

Currently, Cooper-Standard holds a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the auto space are Fox Factory Holding Corp FOXF, CarMax, Inc KMX and Gentex Corporation GNTX, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Fox Factory has an expected long-term growth rate of 16.7%. In the past six months, shares of the company have rallied 22.8%.

CarMax has an expected long-term growth rate of 12.6%. In the past six months, shares of the company have surged 36.2%.

Gentex has an expected long-term growth rate of 5%. In the past six months, shares of the company have returned 36.8%.

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