BB&T Capital Markets reiterates its "Buy (1)" rating on Cooper Tire & Rubber Co. despite sluggish tire demand. Cooper's stock price on the New York Stock Exchange closed at $10.65 on Thursday, Sept. 4, 2008.
According to analysts Anthony Cristello and Allen Hatzimanolis, North American tire replacement demand continues to trend below expectations. In addition, Cooper "does not have enough international exposure to fully offset many of the domestic pressures."
Cooper's third-quarter shipments will be soft, they say. However, many of the company's internal initiatives will drive improved profitability.
"Our positive thesis on shares of (Cooper) is predicated... on continued price increases -- due to rational industry behavior and tight capacity -- and the potential for gross margin expansion given the recent stabilization in raw material prices."
Cooper Tire posted net sales of $773 million for the second quarter, a record for the company. However, Cooper also suffered a net loss of $22 million during the quarter.
