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TheStreet Open House

Why Cooper Tire & Rubber (CTB) Is Gaining Today

NEW YORK (TheStreet) -- Cooper Tire & Rubber (CTB) was gaining 6% to 424.18 Friday after beating analysts' estimates for earnings and revenue in the fourth quarter.

For the fourth quarter the tire producer posted earnings of 31 cents a share, beating analysts' expectations of 26 cents a share by 5 cents. The company reported revenue of $861 million for the quarter. Analysts surveyed by Thomson Reuters expected revenue of $774.3 million for the quarter.

Cooper Tire saw a reduced impact from the failed Apollo Tyres merger in the quarter, recording a $9 million hit from the terminated agreement.

The company's North America Tire Operations division reported net sales of $628 million in the quarter, down 23% from the year-ago quarter.

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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 and attractive valuation levels. 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, 0.43, 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 1.18, which illustrates the ability to avoid short-term cash problems.
  • The revenue fell significantly faster than the industry average of 12.0%. Since the same quarter one year prior, revenues fell by 24.0%. 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. Compared to other companies in the Auto Components industry and the overall market on the basis of return on equity, COOPER TIRE & RUBBER CO has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • The share price of COOPER TIRE & RUBBER CO has not done very well: it is down 6.64% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
  • You can view the full analysis from the report here: CTB Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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