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Cooper Tire (CTB) Up 1.2% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Cooper Tire (CTB - Free Report) . Shares have added about 1.2% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.

Cooper Tire Posts Narrower-Than-Anticipated Q2 Loss

Cooper Tire reported second-quarter 2020 adjusted loss per share of 12 cents, narrower than the Zacks Consensus Estimate of a loss of 46 cents. Better-than expected contribution from the International Tire Operations segment led to narrower-than expected loss.

The bottom line deteriorated from earnings per share of 18 cents recorded in the prior-year quarter due to lower revenues across all segments amid coronavirus woes.

The company’s net sales declined 26.9% year over year to $496.3 million for second-quarter 2020, mainly due to lower unit volume and unfavorable foreign currency impact. The reported figure, however, topped the Zacks Consensus Estimate of $484 million.

Gross profit amounted to $65.6 million, down from $99 million recorded in the prior-year quarter. Additionally, operating profit plunged 83.2% from the prior-year quarter to $5.3 million.

Key Takeaways

Net sales in Americas Tire Operations slid 26.9% year over year to $426 million on lower unit volume and unfavorable foreign currency impact. However, the reported figure topped the Zacks Consensus Estimate of $394 million. Operating profit in the segment tanked 53.4% from the year-ago quarter to $22 million. Operating margin was 5.1% compared with the prior-year quarter’s 8%.

Revenues in International Tire Operations declined 27.1% from a year ago to $101 million due to lower unit volume, unfavorable price mix and adverse foreign currency translation impact. The top line also missed the Zacks Consensus Estimate of $114 million. Operating loss was $1 million against operating income of $1 million posted in the year-ago quarter. However, the metric was narrower than the Zacks Consensus Estimate of a loss of $13.79 million. Operating margin was 1.4% compared with 0.9% reported in the prior-year quarter.

Cooper Tire had cash and cash equivalents of $541 million as of Jun 30, 2020 compared with $112 million recorded in the comparable year-ago period. Capital expenditure declined to $17 million from the year-ago level of $45 million.

As of Jun 30, 2020, long-term debt and finance leases amounted to $324.6 million, up from $120.6 million on Jun 30, 2019.

It expects improvement in the business during second-half 2020. Capex for the full year is estimated to be at the high end of the forecast range of $140-160 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 25.18% due to these changes.

VGM Scores

At this time, Cooper Tire has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Cooper Tire has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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