Tire maker Cooper Tire & Rubber Co. (CTB) reported Thursday a profit for the second quarter that increased from last year, reflecting lower raw material costs and selling, general and administrative expenses as well as 10 percent increase in shipment volumes. However, earnings per share for the quarter missed analysts' expectations, while quarterly net sales topped their estimates.
"We continued our strong performance in what is usually a seasonally weak quarter, posting very good volume growth in most geographic regions. Pricing decreased, mainly driven by lower raw material costs, but the 10-percent global unit growth, along with our focus on cost reductions, helped us exceed last year's operating margin," Chairman and CEO Roy Armes said in a statement.
The Findlay, Ohio-based company reported net income attributable to the company of $38.18 million or $0.59 per share for the second quarter, higher than $35.49 million, or $0.55 per share in the prior-year quarter.
On average, four analysts polled by Thomson Reuters expected the company to report earnings of $0.80 per share for the quarter. Analysts' estimates typically exclude special items.
Cooper Tire's net sales for the quarter edged up 1 percent to $888.69 million from $884.13 million in the same quarter last year, and topped three Wall Street analysts' consensus estimate of $863.27 million. Unit volume growth was 10 percent.
North America Tire net sales for the quarter grew 3 percent from last year to $639 million, with unit shipments growing 9 percent amid sales of new, higher margin light truck and SUV products.
International Tire net sales decreased 8 percent from the year-ago quarter to $327 million, with unit shipments growing 5 percent.
Cooper Tire noted that second-quarter raw material costs decreased about 1 percent. Selling, general and administrative expenses also declined to $71.28 million from $80.99 million last year.
Operating profit for the quarter grew to $76.59 million or 8.6 percent of net sales, higher than $69.17 million or 7.8 percent of net sales, in the year-ago quarter.
"The third quarter typically is our seasonally strongest quarter, and we expect to build on our momentum as raw material costs remain favorable and demand looks solid. We expect global tire markets will remain highly competitive, and overall economic conditions will continue to show modest improvement," Armes added.
Looking ahead, Cooper Tire expects raw-material prices in the third quarter to be roughly flat sequentially.
The company also said it continues to expect to meet or exceed industry unit volume growth in its largest markets in 2014. Capital expenditures for the year are expected to be between $175 million and $185 million.
Separately, the company said it entered into an accelerated share repurchase (ASR) program with J.P. Morgan Chase Bank, N.A. (JPM). As part of the ASR agreement, the company would buy back an aggregate of $200 million of its common stock. Cooper would receive about 80 percent of the number of shares to be repurchased at the inception of the ASR program, or about 5.6 million shares, based on the closing price on August 6, 2014.
In Thursday's regular trading session, CTB is currently trading at $28.40, down $0.34 or 1.18% on a volume of 0.41 million shares.
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