KeyBanc upgrades Cooper stock; BB&T holds pat

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One week ago, KeyBanc Capital Markets downgraded Cooper Tire & Rubber Co.'s stock from "Hold" to "Underweight" following its third-quarter financial results. Now the rating is back to "Hold."

KeyBanc's Managing Director Saul Ludwig described the quick turnaround this way:

"On Monday, November 10, 2008, we downgraded our rating on Cooper Tire shares to Underweight with a downside price target of $5, as we felt the downside risk was greater than any upside potential; at that time, Cooper Tire's shares were priced at $7.79.

"Cooper Tire's shares closed Wednesday (Nov. 12) at $4.96. This was a three-day decline of more than 36% versus a decline of 8.5% for the S&P 500 over the same period.

"As Cooper Tire's shares have now (Nov. 13) surpassed our price target of $5, we do not believe that there is enough downside risk to justify maintaining an Underweight rating. Therefore, we are increasing our rating to Hold."

Ludwig thinks two factors will limit downside from the stock's current level:

* The current valuation is historically low; and

* the balance sheet remains strong.

"Admittedly, Cooper Tire's shares reached our price target faster than we expected," says Ludwig.

Tony Cristello, senior vice president of Equity Research for BB&T Capital Markets, is maintaining his "Hold (2)" rating for Cooper's stock.

He says the next few quarters could become "messy" for the company as it awaits the results of its capacity study of its U.S. facilities.

"While all options are still on the table pending the results of the study, we think it more likely than not that Cooper may decide to close one of its four U.S. plants outright, and rely more on its capacity in Mexico and China to fill orders here in the States.

"That said, if management is able to more closely align its
capacity with reduced demand levels for replacement tires, we think
there remains ample potential for Cooper to produce significantly higher earnings in the back half of 2009 and early 2010."

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