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Why Cooper Tire & Rubber (CTB) Is Down Today

NEW YORK (TheStreet) -- Cooper Tire & Rubber (CTB) was falling 8.8% to $22.63 on Monday after the tire maker said Chinese labor strikes cost the company $29 million in the third quarter.

In its delayed third-quarter earnings report, Cooper said labor strikes cost it $22 million in reduced production. The remaining $7 million hit was due to "manufacturing inefficiencies." The tire maker also incurred $5 million in expenses due to a failed bid by Apollo Tyres to acquire Cooper.

Cooper posted break-even earnings on a per-share basis in the third quarter. Revenue fell 24% to $832 million. 

The company expects to report fourth-quarter results sometime in mid-March.

Must read: Short Interest Expands By 12.2% For CTB

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TheStreet Ratings team rates COOPER TIRE & RUBBER CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate COOPER TIRE & RUBBER CO (CTB) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The current debt-to-equity ratio, 0.46, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.09, which illustrates the ability to avoid short-term cash problems.
  • CTB, with its decline in revenue, underperformed when compared the industry average of 13.5%. Since the same quarter one year prior, revenues fell by 16.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. When compared to other companies in the Auto Components industry and the overall market, COOPER TIRE & RUBBER CO's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • The gross profit margin for COOPER TIRE & RUBBER CO is rather low; currently it is at 20.76%. Regardless of CTB's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 4.01% trails the industry average.
  • You can view the full analysis from the report here: CTB Ratings Report

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