Cooper Tire & Rubber Co.’s CTB earnings increased to 93 cents per share in the third quarter of 2015 from 77 cents in the prior-year quarter. Also, the figure comfortably surpassed the Zacks Consensus Estimate of 76 cents. Net income amounted to $53 million compared with $48 million in the third quarter of 2014.
Revenues of Cooper Tire declined 15% year over year to $782 million in the reported quarter. The decline in the top line was due to the company’s sale of interest in Cooper Chengshan (Shandong) Tire Company Ltd. (“CCT”). However, revenues outpaced the Zacks Consensus Estimate of $762 million. Revenues in the reported quarter benefited from an increase in unit volume in both the Americas and International segments, partially offset by the adverse impact of price and mix.
Operating profit was $82 million (10.5% of sales) in third-quarter 2015 compared with $89 million (9.7% of sales) a year ago.
Segment Details
Americas Tire Operations recorded a 1.2% increase in revenues to $702 million, driven by an increase in unit volume, partially offset by the adverse impact of price and mix. Operating profit in the segment improved to $102 million (14.6% of sales) in the reported quarter from $76 million (10.9% of sales) a year ago. The increase was driven by favorable raw material costs and higher unit volumes which offset higher manufacturing costs, increased selling, general & administrative expenses, and adverse currency impact.
International Tire Operations reported a 62.1% plunge in revenues to $119 million, mainly due to the absence of CCT revenues. Operating loss amounted to $5 million, comparing unfavorably with operating profit of $23 million recorded a year ago. The loss was due to lower price and mix, and the absence of CCT which offset the positive impact of lower costs of raw materials and increase in volumes.
Financial Position
Cooper Tire had cash and cash equivalents of $424.2 million as of Sep 30, 2015, up from $335.8 million as of Sep 30, 2014. Long-term debt was $297.9 million as of Sep 30, 2015, against $341.1 million as of Sep 30, 2014.
In the first nine months of 2015, Cooper Tire had cash flow of $133.2 million from operating activities compared with $98 million in the year-ago period. Capital expenditures rose to $128.6 million from $112.1 million a year ago.
Share Repurchase
In Feb 2015, Cooper Tire authorized the repurchase of shares worth up to $200 million by Dec 31, 2016. During the third quarter of 2015, the company repurchased 589,945 shares under the program for $22.8 million.
Outlook
Cooper Tire expects raw material costs to decrease marginally in the fourth quarter of 2015. For 2015, capital expenditures are expected between $195 million and $205 million.
The company expects fourth-quarter 2015 results to be better than the year-ago quarter. The quarter will benefit from lower raw material costs. Americas Tire Operations will be under pressure due to normal, seasonally higher costs related to employee compensation and scheduled plant downtime. The company also anticipates higher profit in the International business segment in the fourth quarter.
However, Cooper Tire expects to generate an operating loss for the full year in the International business segment. Overall, operating margin is expected to be above the higher end of the mid-term target of 8%–10% in 2015.
Zacks Rank
At present, Cooper Tire carries a Zacks Rank #3 (Hold).
Better-ranked automobile stocks include General Motors Co. GM, Superior Industries International, Inc. SUP and Lithia Motors Inc. LAD. All these stocks carry a Zacks Rank #2 (Buy).
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