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Bear of the Day: Cooper Tire & Rubber Company (CTB)

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Shares of Cooper Tire & Rubber Company (CTB - Free Report) have plummeted 24% since the start of the year, which is even worse than its industry’s 10% decline. Looking ahead, the firm’s earnings projections are all speeding in the wrong direction.


The Findlay, Ohio-based firm posted adjusted second-quarter earnings of $0.30 per share, which actually beat the Zacks Consensus Estimate of $0.24. However, Cooper’s bottom line plummeted from $0.85 per share in the year-ago period. Meanwhile, the firm’s net sales dipped roughly 3% to $698 million. The tire manufacture’s operating profit also sank 61%.

Cooper, which designs and manufactures tires under its namesake brand along with Mastercraft, Dean, Starfire, Roadmaster, and others, faces an uncertain future. In fact, chief executive Brad Hughes said in Cooper’s second-quarter earnings statement that the “challenging industry conditions have continued longer than expected.”

“Due to continuing industry challenges and, in particular, rising raw material costs, we are revising our expectations for the balance of the year,” Hughes continued. “Cooper now anticipates unit volume to be flat in 2018 compared to 2017, with a modest sequential improvement in operating profit margin in the second half of this year.”

On the positive side, the company said it continues to stand by its five-year financial targets. This includes reaching an operating profit of 10% to 14%. But we are less worried about Cooper’s longer-term outlook at the moment.

Price Movement

Investors will see that shares of CTB have plummeted over the last three years to lag its industry’s small gain. The last two years have been even less kind to Cooper, with its shares down over 30%. Yet, the last 12 months have been the worst. Plus, shares of Cooper dipped 5.5% during regular trading hours Tuesday to hit $26.78.



Outlook & Earnings Revisions

Our current Zacks Consensus Estimate is calling for Cooper’s full-year revenues to sink by 0.6% to hit $2.84 billion. Moving onto the really important part, the bottom end of the income statement, the firm’s adjusted quarterly earnings are projected to plummet by 61.9% to hit $0.45 per share. Meanwhile, the tire company’s fiscal year EPS figure is expected to tank by 54.8%.

CTB has also received four downward earnings estimate revisions for each of its upcoming two quarters over the last 60 days, against no upward changes. During this same time, Cooper has seen four full-year revisions, with 100% agreement to the downside. Investors will also see that the firm’s consensus earnings estimates have all fallen significantly over the last 90 days.


Bottom Line

Cooper is currently a Zacks Rank #5 (Strong Sell) based on its downward earnings revision trends, which shows that some analysts are less positive about the company’s future earnings outlook. Therefore, CTB might be a stock to stay away from for now.

Investors interested in this industry might also want to look elsewhere as Cooper’s largest peers, Goodyear (GT - Free Report) , Bridgestone (BRDCY - Free Report) , and Michelin (MGDDY - Free Report) , all currently sport a Zacks Rank #4 (Sell) or #5 (Strong Sell).

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