Cooper Tire & Rubber Company - Growth & Income
February 29 2012 - 7:00PM
Zacks
Estimates have been rising for
Cooper Tire & Rubber
Company (CTB) after the company delivered better than expected
fourth quarter results.
It is a Zacks #2 Rank (Buy).
Based on current consensus estimates, analysts
project 53% EPS growth this year and 28% growth next year. On top
of this, the company pays a dividend that yields a solid 2.5%.
Valuation is attractive too, with shares trading at
less than 9x forward earnings.
Company Description
Cooper manufactures and sell tires around the
globe. It is based in Findlay, Ohio and has a market cap of $1.0
billion.
Solid Fourth Quarter Results
The company delivered better than expected fourth
quarter results on February 27. Earnings per share came in at 51
cents, crushing the Zacks Consensus Estimate of 39 cents.
Net sales rose 14% to $1.045 billion, ahead of the
Zacks Consensus Estimate of $1.010 billion. This was driven by 16%
growth in the North American Tire division and 10% growth in the
International Tire division.
Rising input costs did squeeze the gross profit
margin a bit, as it declined from 12.2% to 10.9% of net sales. But
this was somewhat offset by lower selling, general and
administrative expenses. Overall, operating income increased a
solid 8%.
Estimates Rising
We have seen a nice bump in 2012 estimates from
analysts following the strong quarter. This has sent the stock to a
Zacks #2 Rank (Buy).
The 2012 Zacks Consensus Estimate is now $1.83,
representing 53% growth over 2011 EPS. The 2013 consensus estimate
is currently $2.36, corresponding with 28% growth.
Looking at the recent analyst reports, many expect
Cooper's recent sales momentum to continue throughout 2012, and
that the company will be able to offset rising raw material costs
going forward. And this should drive solid double-digit EPS growth
over the next couple of years.
Steady Dividend
In addition to solid growth, the company pays a
dividend that yields a solid 2.5%. It has paid the same 10.5 cent
per share quarterly dividend since 1998.
Reasonable Valuation
Valuation looks attractive with shares trading at
just 8.8x 12-month forward earnings, a discount to the industry
median of 13.4x, and to its 10-year median of 12.7x.
Its price to tangible book ratio of 2.2 is also
below the industry multiple of 2.6.
The Bottom Line
With rising estimates, solid growth prospects, a
steady 2.5% dividend yield and attractive valuation, Cooper Tire
offers a lot to like.
Todd Bunton is the Growth & Income Stock
Strategist for Zacks Investment Research and Co-Editor of the
Reitmeister Value Investor.
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