Cooper Tire & Rubber Co.’s (CTB) adjusted earnings in the fourth quarter of 2014 increased to 45 cents from 31 cents in the prior-year quarter. However, the figure missed the Zacks Consensus Estimate of 62 cents.
Results were impacted by weakness in international operations, which offset strong unit volumes in the Americas segment. Including the gain on the joint venture interest sale in the reported quarter, net income amounted to $82 million or $1.39 per share, compared with $20 million or 31 cents per share in the fourth quarter of 2013.
The results for fourth-quarter 2013 had been affected by loss related to a strike by workers at Cooper Tire’s Chinese joint venture, Cooper Chengshan (Shandong) Tire Company Ltd (“CCT”); costs related to the terminated merger agreement with Apollo Tyres Ltd.; and higher costs and lower volume associated with shipping inefficiencies related to ERP system implementations.
Revenues of Cooper Tire declined 5% year over year to $820 million in the quarter. The decline came on the back of loss of unit volumes due to the sale of interest in CCT, along with unfavorable price and mix. However, revenues beat the Zacks Consensus Estimate of $805 million.
Operating profit increased to $54 million (6.5% of sales) from $47 million (5.5% of sales) a year ago.
2014 Performance
Cooper Tire’s adjusted earnings increased to $2.53 per share for full-year 2014 from $1.73 in 2013. However, the figure missed the Zacks Consensus Estimate of $2.70. Revenues for full-year 2014 dropped to $3.42 billion from $3.44 billion in 2013, but surpassed the Zacks Consensus Estimate of $3.41 billion.
Segment Details
The Americas Tire Operations recorded a 10% increase in revenues to $689 million. Operating profit in the segment improved to $66 million (9.5% of sales) in the reported quarter from $35 million (5.5% of sales) in the fourth quarter of 2013. The increase was driven by favorable raw material costs, higher unit volumes and favorable product liability costs, which offset the unfavorable price and mix, and higher manufacturing costs.
The International Tire Operations posted a 32.5% plunge in revenues to $191 million, mainly due to the absence of CCT revenues, along with lower volumes and unfavorable price and mix. Operating profit fell to $2 million (1.1% of sales) from $22 million (7.7% of sales) a year ago due to lower price and mix and decline in volumes, which offset the lower raw material costs.
Financial Position
Cooper Tire had cash and cash equivalents of $552 million as of Dec 31, 2014, up from $398 million as of Dec 31, 2013. Long-term debt was $301 million as of Dec 31, 2014, translating into a long-term debt-to-capitalization ratio of 25.4% as against $338.8 million of debt and long-term debt-to-capitalization ratio of 22.6% as of Dec 31, 2013.
Outlook
Cooper Tire expects raw material costs to decline sequentially in the first quarter of 2015. For 2015, capital expenditures are expected between $205 million and $215 million.
The company expects to outperform industry unit volume growth in its largest markets this year. It is also planning to expand its business in Asia.
At present, Cooper Tire carries a Zacks Rank #2 (Buy). Better-ranked automobile stocks include Superior Industries International, Inc. (SUP), Tata Motors Limited (TTM) and Wabash National Corp. (WNC), all sporting a Zacks Rank #1 (Strong Buy).
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