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Cooper Tire (CTB) Up 8.1% 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 8.1% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.

Cooper Tire Q3 Earnings Surpass Estimates, Down Y/Y

Cooper Tire & Rubber Co. has posted earnings of $1.07 per share in the third quarter of 2018, beating the Zacks Consensus Estimate of 45 cents. However, the bottom line was lower than the prior-year quarter’s figure of $1.18 per share.

Cooper Tire recorded net sales of $738 million, missing the Zacks Consensus Estimate of $747 million. However, the top line came in higher than the year-ago quarter’s net sales of $734 million.

Operating profit was $81 million in the third quarter of 2018, down 26.7% from the year-ago quarter.


Segment Details

Americas Tire Operations registered 0.5% increase in net sales to $629 million. Operating profit in this segment declined 30.1% to $87 million while operating margin decreased from 20% to 13.9%.

International Tire Operations registered 0.6% decline in revenues to $162 million. Operating profit was $6 million, increasing from $2 million in the year-ago quarter. Operating margin rose to 3.7% from 1.3% in the year-ago quarter.

Financial Position

Cooper Tire had cash and cash equivalents of $208.6 million as of Sep 30, 2018, down from $258.4 million as of Sep 30, 2017. Capital expenditure decreased to $46 million in the third quarter of 2018 from $53 million in the year-ago quarter.

Share Repurchases

During the third quarter of 2018, the company spent $1 million for repurchasing 31,154 shares at a price of $26.59 per share. Between August 2014 and Sep 30, 2018, Cooper Tire brought back 15.8 million shares at an average price of $34.11 per share.

Outlook

For fourth-quarter 2018, Cooper Tire anticipates unit volume to grow in the United States. This is likely to be offset by persistent volume declines in other regions. The company continues to expect an impact from higher raw material costs. It expects fourth-quarter 2018 operating margin to be close to the prior-quarter level.

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 an upward trend in fresh estimates. The consensus estimate has shifted 10.4% 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 upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Cooper Tire has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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