Monday, February 07, 2011

Global Tire Company Buy Opportunity

Cooper Tires
Where The Rubber Meets the Road

This Monday I've got a buy long recommendation on Cooper Tire & Rubber. Cooper has a PE Ratio of 10 with a 1.8% dividend making it a decent long term buy with the steady demand for tires worldwide.

Cooper Tire & Rubber 4th quarter earnings conference call is scheduled for Friday, Feb 25, 2011, 11:00 am eastern time.

Zacks Equity Investment Research reported December, 2010 that Cooper will increase its ownership in two of its affiliated Mexico operations.

Firstly, Cooper Tire will raise its ownership stake in Corporacion de Occidente SA de CV., to 58% from 38%. Upon completion of the deal in January 1, 2011, the Mexican entity will be fully consolidated in the company's financial results starting in 2011.

Secondly, Cooper Tire will fully acquire Cooper Tire & Rubber Company de Mexico SA de CV by purchasing the remaining 50% stake in the entity. This entity conducts sales and marketing in Mexico and will also be fully consolidated in the company’s results.

Cooper Tire is constantly working to increase its capacity in order to meet the rising demand for replacement tires in the high performance and ultra-high performance categories. To meet this purpose, the company has outsourced the production of economy tires (medium truck and certain light vehicle tire products) to low-cost manufacturers of the Asian countries such as China, India as well as Mexico.

In the third quarter of 2010, Cooper Tire showed an 18% fall in profit to $49.4 million from $60.2 million in the same quarter of prior year (all excluding the restructuring charges related to the closure of the Albany, Georgia facility).

On earnings per share basis, profits declined 20% to 79 cents from 99 cents in the third quarter of 2009. The lower profit was attributable to higher raw material prices, reflecting a 14% rise in cost of sales to $754.7 million. Despite this, it was higher than the Zacks Consensus Estimate of 62 cents per share.

Sales in the quarter grew 10% to $883 million. Operating profit declined to $67.1 million from $70.7 million in the year-ago quarter due to the above-explained factor.

Cooper Tire & Rubber Company, a Zacks #1 Rank (Strong Buy) stock, expects to enhance its production volume by 10% in 2011 compared with 2010. The company has implemented worldwide increase in prices as it anticipates raw material costs to continue to increase in the near term.

Buy Long Copper Tire & Rubber – Ticker CTB

Buy Entry: 21.40 to 22.14

Stop-Loss: 20.37

Take Profit Areas: 25.02 to 25.44, 25.86 to 26.31, 28.48 to 28.94, 33.44 to 34.07, 36.98 to 37.64

Cooper Tire & Rubber Company Profile

Cooper Tire & Rubber Company manufactures and markets replacement tires primarily in North America and internationally. The company produces passenger car and light truck tires for independent tire dealers, wholesale distributors, regional and national retail tire chains, and other large automotive product retail chains. It also produces passenger car, light truck, racing, and motorcycle tires, and markets these products to dealers in the replacement markets. In addition, the company produces bias, radial light and medium truck tires, and off-the-road tires. Cooper Tire & Rubber Company was founded in 1913 and is based in Findlay, Ohio.

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