VC Visteon Corporation

Cooper Tire & Rubber Company (CTB) reported earnings of 87 cents per share in the first quarter of 2013 that more than doubled from 34 cents in the prior-year quarter. With this, the company topped the Zacks Consensus Estimate by a substantial margin of 21 cents per share. Net earnings also increased significantly to $56.1 million from $21.6 million in the first quarter of 2012.

However, revenues went down 12.5% to $861.7 million during the quarter, missing the Zacks Consensus Estimate of $971.0 million. The quarter recorded decline in volumes due to deployment of a major phase of ERP system and inventory adjustments by certain key customers. In addition, the soft global tire market and continuous weakness in the world economy marred consumer spending.

Operating profit more than doubled to $96.7 million (11.2% of sales) from $47.7 million (4.8%) a year ago. Operating profit in the quarter was positively affected by lower material costs of $90 million and lower manufacturing costs of $19 million. These were partially offset by $44 million in unfavorable price and mix and $15 million in lower volumes.

Segment Details

The North American Tire Operations recorded a 14% decline in revenues to $602.0 million. The decrease in sales was attributable to a drop in unit sales (14%). The company’s total light vehicle tire shipments in the U.S. were down 14%. Rubber Manufacturers Association (RMA) member shipments declined 6% and total industry shipments (that includes an estimate for non-RMA members) decreased 1% during the quarter.

Operating profits in the segment went up significantly to $71.0 million (11.9% of net sales) from $22.0 million in the first quarter of 2012. This increase was attributable to a decrease in raw material costs and lower product liability costs.

The International Tire Operations posted a 16% decline in revenues to $341.0 million. The decrease was caused by lower pricing and mix that more than offset the impact of higher unit volumes.

Operating profits went down 9.1% to $30.0 million (8.8% of net sales) compared with $33.0 million (8.1%) a year ago. The profits were favorably impacted by lower raw material costs and lower selling, general and administrative costs, which were more than offset by an unfavorable price and mix and higher manufacturing costs.

Financial Position

Cooper Tire had cash and cash equivalents of $272.2 million as of Mar 31, 2013, up from $257.6 million in the corresponding year-ago quarter-end. Long-term debt stood at $351.6 million as of Mar 31, 2013, translating into a long-term debt-to-capitalization ratio of 30.1%. This compared with $346.2 million or 36.4% as of Mar 31, 2012.

Outlook

Cooper Tire expects that raw material cost will decline sequentially by 1% in the second quarter of 2013. In the first quarter of 2013 capital expenditures was $49.3 million compared with $37.1 million a year ago. For 2013, capital expenditures are expected between $195.0 million and $215.0 million.

Our Take

Cooper Tire & Rubber Company, a Zacks Rank #3 (Hold) stock, believes stabilizing raw material costs, flexible manufacturing operations, profitable investments, and competitive labor agreements will help the company improve results despite headwinds encountered by the industry.

Cooper Tire’s peer, Goodyear Tire & Rubber Company (GT) reported a 32% rise in earnings to $111 million or 45 cents per share in the first quarter of 2013 from $84 million or 34 cents in the year-ago quarter (all excluding special items). The company’s earnings per share exceeded the Zacks Consensus Estimate by 15 cents during the quarter. Revenues in the quarter slid 11% to $4.9 billion, missing the Zacks Consensus Estimate of $5.1 billion.

Other stocks that are performing well in the broader industry where Cooper Tire operates include Visteon Corp. (VC) and STRATTEC Security Corp. (STRT). Both the companies carry a Zacks Rank #1 (Strong Buy).
 

 
COOPER TIRE (CTB): Free Stock Analysis Report
 
GOODYEAR TIRE (GT): Free Stock Analysis Report
 
STRATTEC SEC CP (STRT): Free Stock Analysis Report
 
VISTEON CORP (VC): Free Stock Analysis Report
 
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