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Analyst Blog

On Aug 19, 2014, we issued an updated research report on Cooper Tire & Rubber Co. (CTB - Analyst Report). This Zacks Rank #2 (Buy) stock’s earnings per share increased to 59 cents in the second quarter of 2014 from 55 cents in the prior-year quarter. However, the figure lagged the Zacks Consensus Estimate of 80 cents.

Revenues of Cooper Tire improved 1% year over year to $889 million in the quarter, beating the Zacks Consensus Estimate of $870 million.

After the dismissal of the merger proposal with Apollo Tyres Ltd., Cooper Tire is focusing on improving its business operations. As a result, its earnings have begun to improve. Cooper Tire has also restored normal operations at its Chinese joint venture (JV).

The company develops high-performance products to cater to the current market demand. Cooper Tire expects the improving product mix to increase its profitability.

On Aug 7, 2014, the company announced an accelerated share repurchase (ASR) program worth $200 million. The ASR will significantly reduce the outstanding shares of the company, thus having a positive impact on future earnings per share.

Cooper Tire aims to attain operating profit over 10% and net sales of $5–$6 billion per annum in the long term. The company plans to reduce its manufacturing costs by 14% by 2017 through increased automation in production facilities and consolidation of product family.

Cooper Tire also plans to maintain a sustained annual operating profit of 8–10%. It plans to reduce 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.

Some other automobile stocks that are worth considering include Tesla Motors, Inc. (TSLA - Analyst Report), Fox Factory Holding Corp (FOXF - Snapshot Report) and Gentherm Incorporated (THRM - Snapshot Report). While Tesla sports a Zacks Rank #1 (Strong Buy), Fox Factory and Gentherm have a Zacks Rank #2.

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