Cooper Tire & Rubber Company (CTB) reported a profit of $41.2 million or 65 cents per share in the fourth quarter of 2010, falling short of the Zacks Consensus Estimate by a penny. The profit fell 19.5% from $51.2 million or 82 cents per share in the fourth quarter of 2009.
The results excluded restructuring charges related to the closure of the company’s Albany, Georgia facility. Excluding the adjustments, the company’s results were adversely affected by higher raw material costs. Cost of products sold during the quarter escalated 25% to $807.7 million.
Sales in the quarter rose 19% to $919.6 million. Operating profit declined by $5.8 million to $54.6 million from $60.4 million in the year-ago quarter due to higher raw material prices ($138 million). However, it was favorably affected by better price and mix ($115 million), enhanced manufacturing productivity ($8 million), higher volumes ($10 million) and lower restructuring costs ($11 million).
The North American Tire Operations saw an 18% rise in sales to $669.3 million driven by better price and product mix and higher unit sales. The U.S. light vehicle tire shipments in the segment inched up 0.4%, which was lower than the increase in total industry shipment of 7.5% as reported by the Rubber Manufacturers Association. Operating profit in the segment increased to $42.4 million (6.3% of sales) from $39.0 million (6.9%) in the comparable quarter of 2009.
The International Tire Operations recorded an impressive 25% growth in sales of $341.3 million due to better price/product mix and improved volumes. Sales volumes in the Asian operations scaled up 11% (including inter-company shipments), while the same in the European operations rose 6% from the year-ago level. Operating profit dipped $8 million to $18.5 million (5.4% of sales) from $26.5 million (9.7%) in the previous-year quarter.
For full year 2010, Cooper Tire’s profit increased about threefold to $140.4 million or $2.24 per share from $51.8 million or $1.02 per share in the prior year. Sales in the year grew 21% to $3.36 billion led by an 8% increase in unit sales.
Cooper Tire had cash and cash equivalents of $413.4 million as of December 31, 2010, down from $427.0 million in the corresponding quarter-end a year-ago. Long-term debt stood at $326.6 million as of the above date. This translated into a long-term debt to capitalization ratio of 41.5%, down significantly from 51% as of December 31, 2009.
Cooper Tire & Rubber Company, a Zacks #5 Rank (Strong Sell) stock, reiterated its guidance to increase production volume by 10% in 2011 from 2010 due to strong demand. The company has implemented worldwide increase in prices as it anticipates raw material costs to continue to increase (although at a decreasing rate) in near term.
The company has announced price increase by a weighted average of 8%–9% (with the amount of increases varying by product) in the U.S., effective March 15, 2011. This follows a price increase of 2.5% on nearly all light vehicle products on February 1, 2011.
Cooper Tire’s competitor, Goodyear Tire & Rubber Company (GT), also showed a decline in profit during the fourth quarter. The company has recorded a 32% fall in profit to $21 million or 7 cents per share (excluding special items) in the fourth quarter of 2010 from $31 million or 14 cents per share in the same quarter of 2010. However, the company fared well compared with the Zacks Consensus Estimate of a loss of 7 cents per share during the quarter.
The decline in Goodyear’s profit was primarily attributable to higher raw material costs, increased selling, administrative and general expenses and unfavorable currency translation effects. The company’s cost of goods sold increased 17% to $4.19 billion, while selling, administrative and general expenses rose12% to $715 million.
COOPER TIRE (CTB): Free Stock Analysis Report
GOODYEAR TIRE (GT): Free Stock Analysis Report
Zacks Investment Research
