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Cooper Tire (CTB) Beats Q1 Earnings, Misses on Revenues

Cooper Tire & Rubber Co.’s CTB shares lost 2.7% to close at $34.54 on Apr 29, 2016, after the company reported weaker-than-expected revenues that declined from the year-ago quarter. The company’s earnings increased to $1.05 per share in the first quarter of 2016 from 69 cents recorded a year ago. Also, the figure comfortably surpassed the Zacks Consensus Estimate of $1.00. Net income amounted to $59 million compared with $41 million in the first quarter of 2015.

Cooper Tire’s revenues dropped 2% year over year to $650 million in the reported quarter. Further, revenues missed the Zacks Consensus Estimate of $675 million.  Revenues declined due to the adverse impact of price and mix, and currency changes, partially offset by an increase in unit volume.

Operating profit was $91 million (14% of sales) in first-quarter 2016 compared with $70 million (10.6% of sales) a year ago. Operating profit benefited from favorable raw material costs, lower product liability costs, favorable selling, general and administrative expenses (SG&A), and higher volume, partially offset by higher manufacturing costs, negative currency impact and other costs.

Segment Details

Americas Tire Operations recorded a 3.2% decrease in revenues to $579 million, due to unfavorable price and mix, negative foreign currency impact, and lower unit volume. Operating profit in the segment improved to $106 million (18.3% of sales) in the reported quarter from $90 million (15% of sales) a year ago. The increase was driven by favorable raw material costs as well as lower product liability costs, which offset higher manufacturing costs, increased SG&A expenses, lower unit volume, other costs and adverse currency impact.

International Tire Operations reported a 3.6% fall in revenues to $103 million, mainly due to unfavorable price and mix and negative foreign currency impact, partially offset by higher unit volume. Operating loss amounted to $2 million, narrower than $3 million recorded a year ago. The improvement was backed by favorable SG&A expenses and increased volume, partially offset by negative currency impact and other costs.   

Financial Position

Cooper Tire had cash and cash equivalents of $434 million as of Mar 31, 2016, down from $449 million as of Mar 31, 2015. Long-term debt was $296.5 million as of Mar 31, 2016, compared with $299.1 million as of Mar 31, 2015.

In the first quarter of 2016, Cooper Tire had cash flow of $1.64 million from operating activities compared with an outflow of $8 million in the year-ago period. Capital expenditures declined to $36 million from $48 million a year ago.

Share Repurchase

In Feb 2016, Cooper Tire authorized the repurchase of shares worth up to $200 million. During the first quarter of 2016, the company repurchased 689,944 shares for $24.8 million.

From Apr 1 through Apr 27, 2016, Cooper Tire repurchased another 205,928 shares for $7.5 million.

Outlook

Cooper Tire now expects operating margin to increase marginally from 11.9% recorded in 2015, compared to the prior guidance of a decline. Operating results of the International Tire Operations segment is anticipated to improve significantly this year. The company expects unit volumes to increase in both segments this year. For 2016, capital expenditures are expected between $210 million and $240 million.

Cooper Tire expects raw material costs in the second quarter to increase marginally from the first quarter of 2016.

Zacks Rank

At present, Cooper Tire carries a Zacks Rank #2 (Buy).

Other favorably ranked automobile stocks include Superior Industries International, Inc. SUP, Lear Corp. LEA and Wabash National Corp. WNC, all sporting a Zacks Rank #1 (Strong Buy).

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SUPERIOR INDS (SUP): Free Stock Analysis Report
 
LEAR CORPORATN (LEA): Free Stock Analysis Report
 
WABASH NATIONAL (WNC): Free Stock Analysis Report
 
COOPER TIRE (CTB): Free Stock Analysis Report
 
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