Cooper Tire & Rubber Co. Earnings Cheat Sheet: Double Digit Revenue Growth

Rising costs hurt Cooper Tire & Rubber Co. (NASDAQ:CTB) in the second quarter as profit dropped from a year earlier. Cooper Tire & Rubber Company produces and markets passenger, light truck, medium truck, motorsport and motorcycle tires which are sold nationally and internationally in the replacement tire market.

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Cooper Tire & Rubber Earnings Cheat Sheet for the Second Quarter

Results: Net income for the rubber and plastics company fell to $11.5 million (18 cents per share) vs. $44.1 million (70 cents per share) a year earlier. This is a decline of 73.9% from the year earlier quarter.

Revenue: Rose 14.7% to $922.2 million from the year earlier quarter.

Actual vs. Wall St. Expectations: CTB fell short of the mean analyst estimate of 46 cents per share. It fell short of the average revenue estimate of $979.9 million.

Quoting Management: Roy Armes, Chief Executive Officer, commented, “The industry is currently being challenged by two forces: the drop in consumer demand and high raw material prices. These challenges are not new to the tire industry and we have historically found ways to successfully address the issues.While these forces may continue to put pressure on the industry in the short term, we are optimistic about our ability to successfully compete.”

“We are well positioned to take advantage of opportunities to grow profitably.This includes launching a record number of new products in 2011.Our Cooper Zeon RS3 UHP tire was recently recognized by a prominent consumer testing organization as one of the best available on the market. This is further confirmation of our ability to deliver outstanding technology while providing the great value that consumers have come to expect from Cooper. We continue to grow in the areas of UHP, light truck and commercial tire.We are also confident we will compete successfully in the broadline segment.With the growth projected in the international segment, we expect this segment will eventually account for 50 percent of our revenues.”

“The progress we are making was camouflaged in part by tough industry conditions.Replacement tire demand is usually resilient and pullbacks in demand are typically temporary in nature.With our current inventory levels and projected demand, it is likely we will reduce our prior goal of producing 10 percent more tires in 2011 than in 2010.We are confident that our continued focus on reducing costs while delivering quality products places us in a great position to compete when demand improves.”

“We expect raw material costs to remain at elevated levels and to be sequentially higher by less than five percent during the third quarter from the second quarter of 2011.We believe our raw material index will be relatively flat during the fourth quarter.

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins as gross margin fell four percentage points to 7.9% from the year earlier quarter. Over that time, margins have contracted on average 3.4 percentage points per quarter on a year-over-year basis.

Revenue has risen the past four quarters. Revenue increased 20.1% to $906 million in the first quarter. The figure rose 19% in the fourth quarter of the last fiscal year from the year earlier and climbed 10% in the third quarter of the last fiscal year from the year-ago quarter.

The company fell short of estimates last quarter after beating the mark the quarter before with net income of 25 cents versus a mean estimate of net income of 23 cents per share.

Competitors to Watch: The Goodyear Tire & Rubber Co. (NYSE:GT).

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(Source: Xignite Financials)