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Cooper Tire (CTB) Lags Q2 Earnings and Revenue Estimates

Zacks Equity Research

Cooper Tire & Rubber Company CTB reported second-quarter 2019 adjusted earnings per share of 18 cents compared with 30 cents recorded in the prior-year quarter. Also, the bottom line missed the Zacks Consensus Estimate of 51 cents.

The company’s net sales declined 2.8% year over year to $679 million, which missed the Zacks Consensus Estimate of $719 million. Gross profit amounted to $99.1 million, down from $94.2 million recorded in the prior-year quarter.

Also, operating profit was $31.7 million compared with $32.8 recorded in second-quarter 2018.

Segment Details

Net sales in the Americas Tire Operations declined 0.4% year over year to $582 million. Operating profit in the segment rose 15.6% to $47 million despite new and incremental tariffs this year. Also, operating margin was 8% compared with 6.9% in the prior-year quarter.

Revenues in the International Tire Operations declined 17.5% to $139 million. Operating loss was $1 million against operating income of $6 million in the year-ago quarter. Operating margin was a negative 0.9% against a positive 3.4% in the prior-year quarter. The segment witnessed challenges from the ongoing decline within the new vehicle market in China and a weak replacement tire market in Europe.

Cooper Tire & Rubber Company Price, Consensus and EPS Surprise

 

Cooper Tire & Rubber Company Price, Consensus and EPS Surprise

Cooper Tire & Rubber Company price-consensus-eps-surprise-chart | Cooper Tire & Rubber Company Quote

 

Financial Position

At the end of the second quarter, Cooper Tire had cash and cash equivalents of $112 million compared with $180 million in the year-ago quarter. Capital expenditures increased to $45 million from $38 million in the year-ago quarter. At the end of the second quarter, the company had invested $49 million in its new joint venture with Sailun Vietnam.

Outlook

For 2019, the company reiterated its expectation of modest growth in unit volume compared with the actual figure in 2018.

It projects operating margin to improve in 2019. Capital expenditure is expected in the band of $180-$200 million, excluding capital contributions related to Cooper’s pro rata share of its joint venture with Sailun Vietnam or other potential manufacturing footprint investments.

The company expects effective tax rate, excluding significant discrete items, in the range of 23-26%. Charges related to the Melksham, the U.K. restructuring is expected in the band of $8-$11 million.

Zacks Rank & Other Stocks to Consider

Currently, Cooper Tire has a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the auto space worth considering are Copart, Inc CPRT, CarMax, Inc KMX and Gentex Corporation GNTX. While Copart sports a Zacks Rank #1 (Strong Buy), CarMax and Gentex carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Copart has an expected long-term growth rate of 20%. In the past year, shares of the company have rallied 39.3%.

CarMax has an expected long-term growth rate of 12.6%. In the past year, shares of the company have moved up 21.6%.

Gentex has an expected long-term growth rate of 5%. In the past year, shares of the company have returned 18.5%.

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