A month has gone by since the last earnings report for Cooper Tire (CTB). Shares have added about 36.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Cooper Tire due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Cooper Tire's Earnings & Sales Decline Y/Y in Q1
Cooper Tire reported first-quarter 2020 adjusted loss per share of 6 cents, narrower than the Zacks Consensus Estimate of loss of 10 cents. The bottom line declined from earnings per share of 22 cents recorded in the prior-year quarter due to lower revenues across all segments.
The company’s net sales declined 14.1% year over year to $532 million in first-quarter 2020, mainly marred by lower unit volume and unfavorable foreign-currency impact. The reported figure also missed the Zacks Consensus Estimate of $542 million.
Gross profit amounted to $56 million, down from the $88 million recorded in the prior-year quarter. Additionally, operating loss came in at $6.23 million, against the operating profit $26.4 million recorded in the year-ago period. Higher manufacturing costs, lower unit volume and higher restructuring costs affected the company’s profitability during the reported quarter.
Net sales in the Americas Tire Operations slid 11.2% year over year to $457 million on lower unit volume and unfavorable foreign-currency impact. The reported figure also missed the Zacks Consensus Estimate of $512 million. Operating profit in the segment tanked 73.1% to $10 million. This downside was mainly due to unfavorable manufacturing and higher restructuring costs. Further, operating margin was 2.3% compared with the prior-year quarter’s 7.5%.
Revenues in the International Tire Operations declined 28.8% to $102 million due to lower unit volume and unfavorable foreign-currency translation impact. The revenue figure also missed the Zacks Consensus Estimate of $107 million. Operating loss was $10 million, wider than the operating loss of $1 million posted in the year-ago quarter. Operating margin was a negative 10% as against a negative 0.9% reported in the prior-year quarter.
Dividend & Financial Position
The company announced a quarterly dividend of 10.5 cents a share, payable on Jun 26, to shareholders of record on Jun 1, 2020. This marks the 193rd consecutive quarterly dividend paid by the company.
Cooper Tire had cash and cash equivalents of $433.4 million as of Mar 31, 2020 compared with $212.3 million recorded in the year-ago period. Capital expenditures declined to $55 million from the year-ago quarter’s $60 million.
As of Mar 31, 2020, long-term debt and finance leases amounted to $302 million, up from $121.3 million as of Mar 31, 2019.
Cooper Tire suspended the previously-issued 2020 guidance as it expects the coronavirus pandemic’s impact to strain its operations in the days to come.
It now expects capital expenditure in the $140-$160 million band this year.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -629.63% due to these changes.
At this time, Cooper Tire has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Cooper Tire has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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