Analysts cut Cooper price target, re-iterate “overweight rating”

The second quarter was tough, but look out for a rebound in the second half of 2011. That’s the view of Morgan Stanley analysts with reference to Cooper Tire’s dramatic recent share performance. Reducing the company’s price target from $30.00 to $27.00, the company re-iterated our overweight rating saying the tyre manufacturer shares offer “compelling value following [the] recent [stock] sell-off.”

Explaining the rationale behind its thinking Morgan Stanley wrote that the market may have overreacted: “We are cutting numbers post the big second quarter miss but we believe both the market and consensus expectations have over-reacted to what remains a fundamentally strong story of pricing power, constrained supply and emerging markets growth. The current valuation/consensus estimates would be justified if we entered a double-dip recession with dramatic decline in consumer spending or if gas prices once again sharply spike past $4/$5 per gallon…”

They continued: “Assuming a normal economic environment, we see second quarter volume weakness as a blip in demand caused by a sudden spike in gas prices, some of which should re-bound in second half and 2012, as gas prices have receded.”

On the subject of the US import tariffs that have been in place for three years now, the analysts warned against over emphasising the impact the end of the surcharges will have on Cooper’s domestic US tyre sales: “we do not believe the roll-off of these tariffs next year will be as negative for Cooper as the market believes.”

Related news:

• Analysts: Cooper 2Q results a ‘big miss’

• Japanese tyre makers avoid share price carnage

• Bloodbath at the stock exchange

• Cooper profits down, even after sales increase