Cooper Tire & Rubber (CTB 32.62, -3.13) has given up 8.8% after reporting third quarter results that may not be comparable to estimates.
The tiremaker reported third quarter earnings of $1.18 per share, which includes a $39 million benefit from lower product liability costs. Net revenue decreased 2.3% year-over-year to $733.80 million, which was shy of expectations.
Consolidated unit volume declined 2.0% year-over-year as a 7.5% decline in volume in the Americas outweighed 31.3% growth in the international segment. Significant growth in Asia was responsible for International growth.
The decline in the Americas was due to raw material cost variability and weak trends in retail sell-out of tires to consumers. Elevated inventory levels and a fluid promotional landscape also contributed to the decline in volume.
Raw material index increased 6.4% year-over-year with raw material costs growing $19.00 million year-over-year. Operating margin improved to 13.8% from 10.4%, thanks to lower product liability costs.
Net sales in the Americas declined 7.0% to $625 million while segment operating margin improved to 18.8% from 15.1%. Lower unit volume was partially offset by favorable price/mix due to price increases driven by higher material costs. Segment unit volume declined 7.5% year-over-year. U.S. Tire Manufacturing Association noted that member shipments of light vehicle tires in the U.S. were down 1.7% during the quarter. The company's shipments to Mexico fell 8.6% while industry-wide shipments to Mexico fell almost 15.0%.
International net sales spiked 44.8% to $163 million while segment operating margin declined to 0.4% from 2.9%. Unit volume growth and favorable price/mix led to the increase in sales. Segment unit volume grew 31.3% with growth in Asia outweighing a decline in Europe.
Looking to the fourth quarter, the company expects that its operating margin will be below the previously-announced target of 8.0%-10.0%. Operating margin is expected to be impacted by a modest sequential increase in raw material costs. The company expects that unit volume in the Americas will show sequential improvement, but volume in the U.S. is expected to be below average. The international segment is expected to generate unit volume growth. For the full year, Cooper Tire expects that consolidated operating margin will be near the high end of its 8.0%-10.0% target.