Saul Ludwig, managing director of KeyBanc Capital Markets, is maintaining his "Buy (2)" stock ratings on both Goodyear Tire & Rubber Co. and Cooper Tire & Rubber Co. following their respective first-quarter results.
For Goodyear, he estimates earnings per share will be $1.40 for the year, down from a previous estimate of $1.70. He cites the delay in the setting up of the VEBA trust required by the company's agreement with the United Steelworkers of America as the reason for the decrease. The delay will prevent Goodyear from achieving the $55 million savings anticipated from lower legacy costs for the second half of 2007.
Ludwig estimates EPS will be $3.35 in 2008, and reiiterates a price target of $39. (Goodyear's stock price on the New York Stock Exchange closed at $33.53 on Monday, May 7, 2007.)
For Cooper, he estimates earnings per share will be $1.25, up from a previous estimate of $1.10, and has increased his stock price target for 2007 to $26 from $21. (Cooper's stock price closed at $23.87 on Monday, May 7.) He estimates EPS will be $1.75 in 2008 as cost reductions and pricing kick in.
"While we still expect (Cooper) volume growth to undershoot the industry due to the elimination of certain discounts, better pricing should exceed the impact of lost volume."
Although KeyBanc Capital Markets maintains its BUY (2) rating, Ludwig is aware that momentum for the stock is building, and believes "there is still good upside to these shares."
