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Why Is Cooper Tire (CTB) Down 4% Since Last Earnings Report?

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It has been about a month since the last earnings report for Cooper Tire (CTB - Free Report) . Shares have lost about 4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Cooper Tire due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Cooper Tire Earnings Beat Estimates in Q2, Down Y/Y

Cooper Tire & Rubber Co. has posted earnings of 30 cents per share in the second quarter of 2018, beating the Zacks Consensus Estimate of 24 cents. However, the bottom line was lower than the prior-year quarter’s figure of 85 cents per share.

Cooper Tire recorded net sales of $698 million, beating the Zacks Consensus Estimate of $675.4 million. The year-ago quarter’s net sales were $721 million.

Operating profit was $33 million in the second quarter of 2018, down 61.1% from the year-ago quarter.

Segment Details

Americas Tire Operations registered 5% decrease in net sales to $584 million. Operating profit in this segment declined 55.5% to $40 million while operating margin decreased from 14.8% to 6.9%.

International Tire Operations registered 10.9% rise in revenues to $168 million. Operating profit was $6 million, increasing from $3 million in the year-ago quarter. Operating margin rose to 3.4% from 1.8% in the year-ago quarter.

Financial Position

Cooper Tire had cash and cash equivalents of $180 million as of Jun 30, 2018, down from $302 million as of Jun 30, 2017. Capital expenditure decreased to $38 million in the second quarter of 2018 from $45 million in the year-ago quarter.

Share Repurchases

During the second quarter of 2018, the company spent $14 million for repurchasing 517,354 shares at a price of $26.66 per share. Between August 2014 and Jun 30, 2018, Cooper Tire brought back 15.7 million shares at an average price of $34.12 per share.

Outlook

Because of the industry challenges emanating from rising raw material expenses, the company expects unit volume to be flat in 2018 compared with 2017. A modest sequential improvement in operating profit margin is expected in the second half of 2018.

For 2018, capital expenditure is expected to be $200-$220 million, unchanged from the previous guidance. The effective tax rate for the year is expected to be 23-26%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -27.93% due to these changes.

VGM Scores

Currently, Cooper Tire has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Cooper Tire has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.




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