Cooper Tire (CTB) Tops Q3 EPS by 3c

October 31, 2016 7:02 AM EDT

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Cooper Tire (NYSE: CTB) reported Q3 EPS of $1.04, $0.03 better than the analyst estimate of $1.01. Revenue for the quarter came in at $751 million versus the consensus estimate of $790.85 million.

“Cooper generated another strong quarter of operating profit, achieving a record for the first nine months of this year. Excluding the $11.5 million pension settlement charge, our third quarter operating profit would have been 11.9 percent of net sales, a result that continues to be above our medium-term goals. Despite a decline in net sales, our Americas segment generated operating profit margin of more than 15 percent, including the impact of the preliminary tariffs on truck and bus radial (TBR) tires imported from China into the United States. The International segment, which continued to improve its performance, delivered an operating profit for the second consecutive quarter. Cooper continues to execute on our strategy to deliver shareholder value, including returning cash to shareholders through our quarterly dividend and share repurchases, which totaled more than $28 million during the third quarter,” said President & Chief Executive Officer Brad Hughes.

Outlook

Third quarter raw material costs increased 4 percent from the second quarter of 2016, which was in line with the company’s expectations. The company’s internal raw material index increased from 135.5 in the second quarter to 141.2 in the third quarter. Cooper anticipates fourth quarter raw material costs will be up modestly from the third quarter.

The company’s planned acquisition of a majority interest in GRT, a joint venture in China to produce TBR tires for global markets, is on track. Cooper expects the transaction to close in the fourth quarter, pending certain permits and approvals by the Chinese government.

Management expectations for the full year 2016 include:

  • Global unit volume growth in the fourth quarter.
  • Total company operating margin, excluding the impact of acquisitions and non-cash pension settlement charges, is expected to be modestly above 2015 levels.
  • The International segment, excluding the impact of acquisitions, is expected to perform better than originally anticipated for the full year 2016. Management expects the segment to deliver a modest full-year profit.
  • Effective tax rate for full year 2016 is expected to be in a range of 32 percent to 34 percent.
  • Capital expenditures, excluding the impact of acquisitions, are expected to range from $180 million to $200 million for the year. The company continues to invest in organic growth and margin improvement initiatives across all regions, and this updated projection more accurately reflects expected timing of capital spending for those investments.

“The Cooper business model remains a solid foundation for growth and continued profitability,” Hughes said. “We continue to successfully shift our mix to higher margin products, including growing the Cooper brand, and we remain focused on improving our cost structure by optimizing our global manufacturing footprint and investing in automation. These initiatives are driving our strong operating margins in the Americas segment. In China, we are rapidly growing our OE business and expanding our TBR business, which will be aided by the pending acquisition of a majority interest in GRT.

“Looking ahead, we expect that the benefit of lower raw material costs will moderate, and global markets will continue to be very competitive. We will stay focused on continuing to generate strong profit performance across the business as well as driving unit volume growth, which we expect to be led by growth in Latin America and Asia. I am proud of the Cooper teams around the world for staying committed to the effective execution of our strategic plan, which is essential as we work to achieve the ambitious goals we have for Cooper’s growth and profitability in the future.”

For earnings history and earnings-related data on Cooper Tire (CTB) click here.



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