Cooper Tire keeps ‘neutral’ rating

Financial analysts have maintained a “neutral” rating for shares in Cooper Tire & Rubber Company. The report published 4 July by Zack’s Equity Research explained the general reasoning, which follows Apollo Tyre’s agreement to buy the company for US$2.6 billion on 12 June: “We are pleased with its improved 2013-first quarter results and focus on reducing costs together with increased efficiency in each of the plants. However, we are concerned about the increasingly competitive landscape.”

So why the reiteration? On 9 May Cooper Tire reported earnings of 87 cents per share in the first quarter of 2013 that more than doubled from 34 cents in the prior-year quarter. With this, the company topped the Zacks Consensus Estimate by a substantial margin of 21 cents per share. However, revenues went down 12.5 per cent to $861.7 million during the quarter, missing the Zacks Consensus Estimate of $971.0 million. The quarter recorded decline in volumes due to deployment of a major phase of ERP system and inventory adjustments by certain key customers. 

But the real concern is about “the increasingly competitive industry” with Cooper occupying just 15 per cent market share in light vehicle replacement tyres in the US.