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What's in the Cards for Cooper Tire (CTB) in Q2 Earnings?

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Cooper Tire & Rubber Company (CTB - Free Report) is set to report second-quarter 2018 results, before the market opens on Aug 6. In the last-reported quarter, this tire manufacturer delivered an earnings miss of 73.3%. In the trailing four quarters, it missed estimates twice while beating in the remaining two, with an average negative earnings surprise of 9.8%.

Cooper Tire has an expected long-term growth rate of 4%. In the last three months, shares of Cooper Tire & Rubber’s have outperformed the industry it belongs to. During the period, the stock has gained 14% in comparison with the industry’s decline of 2%.

Let’s see how things are shaping up after this announcement.

Factors to Consider

Cooper Tire focuses on developing products with better design and functionality to satisfy the market demand across all regions. Recently, the company introduced Mastercraft Glacier Trex tire. The new tire is suitable for passenger cars and crossover vehicles, which helps consumers to manage their automobiles in severe weather conditions by offering superior braking and handling on snow, and ice. Moreover, in order to enhance its logistics infrastructure and improve business operations, the company has been focusing on expanding the product distribution network in the United States.

However, Cooper Tire operates in an extremely competitive industry. This makes it exposed to the bigger North American peers, with greater financial resources. Moreover, it competes with low-cost producers in Asia, Mexico, South America and Central Europe. If the company fails to improve its operating efficiencies compared with its peers, it might suffer.

The company is also facing rise in capital expenses, primarily due to volatile raw material prices. For 2018, capital expenditures are expected between $215 million and $235 million, higher than $197 million recorded in 2017.

In first-quarter 2018, Americas Tire Operations registered an 8.7% year-over-year decrease in net sales to $485 million. For second-quarter 2018, the Zacks Consensus Estimate for net sales from Americas Tire Operations is $579 million.

In first-quarter 2018, International Tire Operations registered 13.6% year-over-year rise in revenues to $161 million. For second-quarter 2018, the Zacks Consensus Estimate for net sales from International Tire Operations is $145 million.

Earnings Whispers

Our proven model does not conclusively show that Cooper Tire is likely to beat earnings this quarter. This is because, a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Earnings ESP: Cooper Tire has an Earnings ESP of -1.03%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company presently carries a Zacks Rank of 3. This, combined with its Earnings ESP, makes the surprise prediction difficult.

Note that we caution against Rank #4 and 5 (Sell-rated) stocks going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks to Consider

Here are a few stocks worth considering, with the right combination of elements to outpace earnings estimates this time around:

PPL Corporation (PPL - Free Report) has an Earnings ESP of +1.43% and a Zacks Rank of 3. The company is scheduled to report second-quarter 2018 results on Aug 7.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Advance Auto Parts, Inc. (AAP - Free Report) has an Earnings ESP of +4.12% and a Zacks Rank of 2. The company will report second-quarter 2018 results on Aug 14.

The Gap, Inc. (GPS - Free Report) has an Earnings ESP of +3.52% and is a #2 Ranked player. The company is expected to announce its upcoming earnings on Aug 23.

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