Cooper Tire & Rubber Co.’s CTB earnings for the second quarter of 2015 increased to $1.03 from 59 cents in the prior-year quarter. Moreover, the figure comfortably surpassed the Zacks Consensus Estimate of 69 cents.
Net income amounted to $60 million, compared with $38 million in the second quarter of 2014. Results were backed by strong unit volumes in the Americas segment, partially offset by weakness in international operations.
Revenues of Cooper Tire declined 15.4% year over year to $752 million in the reported quarter. The decline resulted from Cooper Tire’s sale of interest in Cooper Chengshan (Shandong) Tire Company Ltd. (“CCT”). However, revenues outpaced the Zacks Consensus Estimate of $716 million.
Operating profit increased to $99 million (13.2% of sales) from $77 million (8.6% of sales) a year ago.
Segment Details
The Americas Tire Operations recorded a 5.3% increase in revenues to $673 million. Operating profit in the segment improved to $109 million (16.1% of sales) in the reported quarter from $65 million (10.1% of sales) in the second quarter of 2014. The increase was driven by favorable raw material costs and higher unit volumes, which offset the reduced selling, general & administrative expenses, unfavorable price and mix, and higher manufacturing costs.
The International Tire Operations reported a 61.8% plunge in revenues to $125 million, mainly due to the absence of CCT revenues. Operating loss amounted to $4 million, comparing unfavorably with operating profit of $26 million recorded a year ago. The loss was due to lower price and mix, and the absence of CCT, which offset the lower costs of raw materials.
Financial Position
Cooper Tire had cash and cash equivalents of $408 million as of Jun 30, 2015, up from $327 million as of Jun 30, 2014. Long-term debt was $299.3 million as of Jun 30, 2015, translating into a long-term debt-to-capitalization ratio of 24.8% as against $341.9 million of debt and long-term debt-to-capitalization ratio of 24.6% as of Jun 30, 2014.
Share Repurchase
In Feb 2015, Cooper Tire authorized the repurchase of shares worth up to $200 million by Dec 31, 2016. During the second quarter of 2015, the company repurchased 1,207,283 shares under the program for $47.7 million.
Outlook
Cooper Tire expects raw material costs to increase marginally in the second half of 2015. For 2015, capital expenditures are expected between $205 million and $215 million.
The company expects to record higher unit volume growth compared with the industry in the U.S., this year. It also anticipates narrower operating loss in the international businesses. Overall, operating margin is expected to be 8%–10% in 2015.
Zacks Rank
At present, Cooper Tire carries a Zacks Rank #3 (Hold). Better-ranked automobile stocks include Tesla Motors, Inc. TSLA, PACCAR Inc. PCAR and Pep Boys – Manny, Moe & Jack PBY. Pep Boys currently sports a Zacks Rank #1 (Strong Buy), while both PACCAR and Tesla carry a Zacks Rank #2 (Buy).
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