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Cooper Tire & Rubber (CTB) Down 7.7% Since Earnings Report: Can It Rebound?

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About a month has gone by since the last earnings report for Cooper Tire & Rubber Company (CTB - Free Report) . Shares have lost about 7.7% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? 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 & Rubber Q2 Earnings Beat, Revenues Miss

Cooper Tire & Rubber posted earnings of 85 cents per share in the second quarter of 2017, beating the Zacks Consensus Estimate of 74 cents. However, earnings were lower than $1.27 in the year-ago quarter.

Net income came in at $45 million compared with $71 million in the second quarter of 2016.

Cooper Tire recorded net sales of $721 million, missing the Zacks Consensus Estimate of $771 million as well the year-ago revenues of $740.3 million.

Operating profit was $75 million in the second quarter of 2017, down $35 million from the year- ago quarter. Operating profit was negatively impacted by volatile raw material costs, product pricing and promotional market environment.

Segment Details

Americas Tire Operations registered a 6% decrease in net sales to $615 million. Operating profit in this segment declined 28.3% to $83 million, while operating margin fell from 17.7% to 13.5%.

International Tire Operations registered a 22.4% rise in revenues to $151 million. Operating profit came in at $1 million, down $3 million from the year-ago quarter. Operating margin declined to 0.8% during the quarter from the year-ago quarter figure of 2.5%.

Financial Position

Cooper Tire had cash and cash equivalents of $302 million as of Jun 30, 2017, down from $412 million as of Jun 30, 2016. Capital expenditures decreased to $45 million in the second quarter of 2017 from $49 million in the year-ago quarter.

Share Repurchases

In Feb 2017, Cooper Tire increased the share repurchase program by $300 million and extended it till Dec 2019. During the second quarter of 2017, the company spent $20.8 million on repurchasing 568,224 shares at a price of $36.55 per share. Since Aug 2014, Cooper Tire has bought back a total of 13.3 million shares at an average price of $34.31 per share.

Outlook

For 2017, Cooper Tire expects unit volume growth in the International segment and in Latin America to improve. Unit volume in the U.S. is projected to be in line with the industry in the second half of 2017.

Cooper Tire expects operating margin for full-year 2017 to be at the high end of the previously announced mid-term target of 8% to 10%. The International Tire Operations segment is expected to witness improved operating profit this year, including its recent acquisition of GRT in China.

For 2017, capital expenditures are still expected between $220−$250 million. The effective tax rate for the year is expected to be 30−33%.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter. In the past month, the consensus estimate has shifted down by 8.3% due to these changes.

VGM Scores

At this time, the stock has a poor Growth Score of F, however its Momentum is doing a bit better with a D. However, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for value based on our styles scores.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.




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