Summary:
Cooper Tire is benefiting from high-performance products and improving business operations since the termination of the Apollo Tyres merger agreement. The accelerated share repurchase program is also expected to have a positive impact on future earnings per share. Cooper Tire reported earnings of $0.77 per share in the third quarter of 2014, which surpassed the Zacks Consensus Estimate of $0.72 and improved from breakeven results in the prior-year quarter. Revenues rose 11% to $920 million, beating the Zacks Consensus Estimate of $907 million. The improvement came on the back of higher unit volume, partially offset by unfavorable price and mix. Thus, we are maintaining our Outperform recommendation on Cooper Tire.

Overview:

Cooper Tire & Rubber Co. (CTB), headquartered in Findlay, OH, manufactures and markets tires and related products. The company has more than 72 manufacturing, sales, distribution, technical and design facilities located in 11 countries across the world. Cooper Tire is the eleventh largest tire company globally and the fourth largest tire manufacturer in North America.

Cooper Tire's operations are organized into two geographical business segments: Americas Tire Operations (accounting for about 70.9% of revenues from external customers in the first nine months of 2014) and International Tire Operations (29.1%).

In the Americas Tire Operations segment (previously North American Tire Operations), Cooper Tire produces automotive, motorcycle and truck tires, tread rubber and equipment. The manufacturing facilities are located in Ohio, Georgia, Mississippi and Arkansas. The segment focuses on passenger and light-truck replacement tires, and caters to independent tire dealers, wholesalers and retail chains in the U.S. The group is mainly tied to the aftermarket for tires and parts, and does not sell directly to original equipment manufacturers (OEMs).

Through the International Tire Operations segment, Cooper Tire produces passenger car, light truck, motorcycle and racing tires in the U.K., Serbia and China. In the U.K., the segment manufactures these products in its Wiltshire plant and delivers them primarily to dealers in the domestic market, continental Europe and Scandinavia.

In China, the International Tire Operations segment manufactures radial and bias medium truck tires, and passenger and light truck tires through its joint ventures (JV) with Kenda Rubber Industrial Co. of Taiwan (Kunshan plant) and a Chinese company, Chengshan (Shandong) Tire Co. The manufactured products from China are exported to Europe and North America, and sold through dealers in the domestic market. However, Chengshan Group has decided to purchase Cooper Tire's stake in the Chinese JV, Cooper Chengshan (Shandong) Tire Company Ltd. ("CCT").

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