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Category: Stock Market and Cooper Tire and Rubber
Date: 24 February 2020 Stock Price: $26.21 We take a look at the 4th quarter earnings report of their 2019 fiscal year of tire manufacturer Cooper Tire & Rubber, whose brands include Mastercraft Tires and Avon Tyres.
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About Cooper Tire and Rubber
Cooper Tire & Rubber Company (NYSE: CTB) is the parent company of a global family of companies that specializes in the design, manufacture, marketing and sale of passenger car, light truck, medium truck, motorcycle and racing tires. Cooper's headquarters is in Findlay, Ohio, with manufacturing, sales, distribution, technical and design operations within its family of companies located in more than one dozen countries around the world.
Overview of Cooper Tire and Rubber 4th quarter 2019 earnings report
The data below refers to the latest quarter's data (unless specified otherwise)
- Net sales: $750.212 million (down from $770.487 million for the same quarter of the previous year)
- Net decreased by -2.6% over the last 12 months
- Cost of goods sold: $618.688 million (down from $645.849 million for the same quarter of the previous year)
- Cost of goods decreased by -4.2% over the last 12 months
- Some margin gains for Cooper Tire and Rubber as its revenues decreased at a slower rate than their cost of goods sold
- Net income: $51.259 million (up from -$419 thousand for the same quarter of the previous year)
- Diluted earnings per share: $1.02 (up from -$0.01 for the same quarter of the previous year)
- PE ratio of Cooper Tire and Rubber: 13.6
- Number of shares in issue: 50.420 million (up from 50.344 million for the same period of the previous year)
- Cash and cash equivalents: $391.332 million
- Cash and cash equivalents per share: $7.76
- Cash and cash equivalents makes up 29.7% of Cooper Tire and Rubber's market capital
- Cash and cash equivalents makes up 13.9% of Cooper Tire and Rubber's total assets
- Inventories: $464.221 million
- Inventories makes up 16.6% of Cooper Tire and Rubber's total assets
- Accounts receivable: $544.257 million
- Accounts receivable makes up 19.% of Cooper Tire and Rubber's total assets
- Total stockholders equity in Cooper Tire and Rubber : $1.264 billion
- Stockholders equity per share in Cooper Tire and Rubber : $23.32
- Cooper Tire and Rubber' is trading at 1.12 times its stockholders equity per share which is well outside the expected range of between 2 and 4 times that most firms tend to trade at
Cooper Tire and Rubber (NYSE: CTB) management commentary on 4th quarter 2019 earnings
FINDLAY, Ohio--(BUSINESS WIRE)-- Cooper Tire & Rubber Company (NYSE: CTB) today reported full year 2019 net income of $96 million, or diluted earnings per share of $1.91, compared with $77 million, or $1.51 per share, last year.
“Cooper has made a great deal of progress on the strategic initiatives we outlined at our May 2018 Investor Day,” said President & Chief Executive Officer Brad Hughes. “With a focus on the consumer, we have continued to execute a physical and e-commerce retail expansion effort that now has Cooper products available in the top five tire retailers in the U.S. We have improved our product mix through a continued focus on high value-add tires, forged ahead into the original equipment (OE) space with Mercedes-Benz as a key customer, and delivered a strong cadence of compelling new products. To enhance the competitiveness of our global manufacturing footprint, we shifted production from our Melksham facility to other lower cost plants, acquired full ownership of our Mexico facility to further develop the full potential of the plant, and opened a new truck and bus radial tire (TBR) joint venture plant in Asia. In addition, we have enhanced our TBR tire business by launching the Cooper brand, which won key OE fitments with Blue Bird school buses. Cooper is also building out a digital marketing capability and increasing brand awareness through a new advertising campaign.
“Our teams around the globe are aligned in executing our strategic plan and delivered improved operating profit and operating profit margin, as well as increased cash flows in 2019, allowing us to continue to fund our strategic initiatives. All of this was achieved in the face of net new tariffs and restructuring costs resulting from our footprint actions.
“Focusing on the fourth quarter, our operating results were in line with our expectations. Operating profit margin improved on both a year-over-year and sequential basis. We saw volume declines in all regions as global tire markets continued to be affected by unfavorable economic and political factors. Yet, in our core U.S. market, light vehicle tire volume was in line with the industry, and in Asia, third party sales were up compared to last year. We have the momentum to continue to make even greater progress on our strategic initiatives and derive even more positive results in 2020. It’s an exciting time of positive transformation at Cooper, and we look forward to building on what we have achieved to deliver value in 2020 and beyond.”
“Cooper has made a great deal of progress on the strategic initiatives we outlined at our May 2018 Investor Day,” said President & Chief Executive Officer Brad Hughes. “With a focus on the consumer, we have continued to execute a physical and e-commerce retail expansion effort that now has Cooper products available in the top five tire retailers in the U.S. We have improved our product mix through a continued focus on high value-add tires, forged ahead into the original equipment (OE) space with Mercedes-Benz as a key customer, and delivered a strong cadence of compelling new products. To enhance the competitiveness of our global manufacturing footprint, we shifted production from our Melksham facility to other lower cost plants, acquired full ownership of our Mexico facility to further develop the full potential of the plant, and opened a new truck and bus radial tire (TBR) joint venture plant in Asia. In addition, we have enhanced our TBR tire business by launching the Cooper brand, which won key OE fitments with Blue Bird school buses. Cooper is also building out a digital marketing capability and increasing brand awareness through a new advertising campaign.
“Our teams around the globe are aligned in executing our strategic plan and delivered improved operating profit and operating profit margin, as well as increased cash flows in 2019, allowing us to continue to fund our strategic initiatives. All of this was achieved in the face of net new tariffs and restructuring costs resulting from our footprint actions.
“Focusing on the fourth quarter, our operating results were in line with our expectations. Operating profit margin improved on both a year-over-year and sequential basis. We saw volume declines in all regions as global tire markets continued to be affected by unfavorable economic and political factors. Yet, in our core U.S. market, light vehicle tire volume was in line with the industry, and in Asia, third party sales were up compared to last year. We have the momentum to continue to make even greater progress on our strategic initiatives and derive even more positive results in 2020. It’s an exciting time of positive transformation at Cooper, and we look forward to building on what we have achieved to deliver value in 2020 and beyond.”
Outlook
“We are optimistic about 2020 as our business model remains strong and our strategic initiatives continue to gain momentum," said Hughes.
Full year 2020 expectations include:
“We are optimistic about 2020 as our business model remains strong and our strategic initiatives continue to gain momentum," said Hughes.
Full year 2020 expectations include:
- A modest global unit volume increase compared to 2019, including in the U.S.
- Operating profit margin that improves during the year, with the second half better than the first half, and the full year exceeding 2019.
- An effective tax rate, excluding significant discrete items, of approximately 25 percent.
- Capital expenditures that will range between $260 and $280 million. This includes investments in Serbia and Mexico.
- Approximately $10 million of restructuring charges related to the transition at the company's Mexico manufacturing facility, which will occur primarily in the first quarter of 2020.
- Higher manufacturing costs in Latin America, Europe and Asia related to both market conditions and the company's footprint actions.
- Higher SG&A expenses, including the impact of the timing of advertising spend.
Cooper Tire and Rubber (NYSE: CTB) stock price history
The image below obtained from Google, shows the stock price history of Cooper Tire and Rubber over the last 5 years. And its been a very volatile but mostly negative time for Cooper Tire and Rubber. 5 years ago the stock of Cooper Tire and Rubber was trading at around $38.60 a stock and its currently trading at $26.10 a stock. That's a loss of -48.2% suffered by Cooper Tire and Rubber stockholders over the last 5 years.
The stock of Cooper Tire and Rubber is trading at close to the midpoint between its 52 week high and 52 week low which to us is a clear indication that the short term sentiment and momentum of Cooper Tire and Rubber is neutral at this point in time.
The stock of Cooper Tire and Rubber is trading at close to the midpoint between its 52 week high and 52 week low which to us is a clear indication that the short term sentiment and momentum of Cooper Tire and Rubber is neutral at this point in time.
Recent coverage of Cooper Tire and Rubber
The extract below discusses the latest regarding Cooper Tire and Rubber (NYSE: CTB) as obtained from TheStreet.com
Cooper Tire & Rubber Company (NYSE: CTB) today announced it has closed on the agreement announced Nov. 1, 2019 to increase ownership in its Mexico joint venture tire manufacturing facility, Corporaci�n de Occidente S. A. de C.V. (COOCSA), from 58 percent to 100 percent.
"Full ownership of COOCSA is part of our strategic plan to optimize Cooper's global manufacturing footprint with cost-competitive production of quality tires in key geographies," said Cooper President & Chief Executive Officer Brad Hughes. "We are excited to continue working with the team in Mexico as we look forward to enhancing the facility's global competitiveness in the tire industry."
Read the full article here
Cooper Tire & Rubber Company (NYSE: CTB) today announced it has closed on the agreement announced Nov. 1, 2019 to increase ownership in its Mexico joint venture tire manufacturing facility, Corporaci�n de Occidente S. A. de C.V. (COOCSA), from 58 percent to 100 percent.
"Full ownership of COOCSA is part of our strategic plan to optimize Cooper's global manufacturing footprint with cost-competitive production of quality tires in key geographies," said Cooper President & Chief Executive Officer Brad Hughes. "We are excited to continue working with the team in Mexico as we look forward to enhancing the facility's global competitiveness in the tire industry."
Read the full article here
Cooper Tire and Rubber (NYSE: CTB) stock valuation
So what do we value Cooper Tire and Rubber stock at after the release of their 4th quarter 2019 earnings and the fiscal guidance provided for the full fiscal 2020? Based on Cooper Tire and Rubber earnings report and fiscal guidance provided our valuation models provides a target (full value) price of Cooper Tire and Rubber at $30.70 a stock. We therefore believe that the stock of Cooper Tire and Rubber is undervalued.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $36.60. Therefore we believe a good entry point into Cooper Tire and Rubber stock is at $27.60 or below. We expect the stock of Cooper Tire and Rubber to increase from current levels to levels closer to our target price (full value price) in coming weeks and moths as we believe it is undervalued at this point in time.
We therefore rate Cooper Tire and Rubber stock as a buy
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $36.60. Therefore we believe a good entry point into Cooper Tire and Rubber stock is at $27.60 or below. We expect the stock of Cooper Tire and Rubber to increase from current levels to levels closer to our target price (full value price) in coming weeks and moths as we believe it is undervalued at this point in time.
We therefore rate Cooper Tire and Rubber stock as a buy
Next earnings release of Cooper Tire and Rubber
It is expected that Cooper Tire and Rubber will publish their 1st quarter 2020 earnings report in late May 2020