Cooper Tire & Rubber (CTB 28.77, +3.32, +13.05%) opened sharply
higher after reporting mixed results for the third quarter.
The tire manufacturer reported above-consensus third quarter earnings of $1.07 per share on a 0.5% year/year increase in revenue to $737.7 mln, which was shy of expectations.
The company did not issue specific earnings or revenue guidance, but management did acknowledge the presence of pricing pressures, resulting from higher raw material costs. The company expects its raw material index to be up 10% year/year. The company increased prices to offset the impact of higher costs, and it expects that the operating margin will not change much on a sequential basis. The company expects that capital expenditures for the full year will be between $200 mln and $220 mln.
Returning to third quarter results, consolidated unit volume ticked up just 0.1%. Operating profit fell 26.7% year/year to $81 mln while operating margin worsened to 11.0% from 15.1%. Unfavorable raw material costs were largely responsible for the decline in profit. The company's raw material index increased 12.4% year /year, representing a $15 mln year/year increase in raw material costs.
Looking at the segment breakdown, Americas net sales grew 0.5% year/year to $629 mln; favorable price and mix were partially offset by lower unit volume and unfavorable currency impact. Segment unit volume declined 0.3% year /year due to a decrease in Latin America, which offset growth in North America. Total light vehicle tire shipments in the United States grew by 1.5%. Operating profit declined 30.1% year/year to $87 mln. The decline was driven by higher costs for raw materials, manufacturing, and product liability. Segment operating margin weakened to 13.9% from 20.0%.
International sales declined 0.6% year/year to $162 mln due to a 4.1% year/year decline in unit volume, which was driven by decreases in Asia and Europe. The Asian market saw an increase in original equipment volume, but that was outweighed by a soft replacement market. Segment operating profit jumped 193.5% year/year to $6 mln while operating margin improved to 3.7% from 1.3% one year ago.
The company ended the quarter with $209 mln in cash and cash equivalents, down from $258 mln one year ago. The company can repurchase up to $193 mln worth of its shares under its current buyback authorization.
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