Cooper Tire & Rubber Co. (CTB) faces intensifying competition and soaring material costs, which can be regarded as major threats for the company. Moreover, its deteriorated cash balance is likely to limit the company's business expansion plans.
Although profits exceeded the Zacks Consensus Estimate by $0.04 per share in the first quarter, the above factors along with a sluggish tire industry exert considerable pressure on the company's earnings. Considering all these elements, we have downgraded our recommendation on shares of Cooper Tire from Neutral to Underperform and set a target price of $17.00.
Our long-term Underperform recommendation on the stock indicates that it will perform below the broader market. Our $17 target price, 7.3x our 2011 EPS estimate, reflects this view.
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