Keybanc lowers earnings per share estimates for Cooper and Goodyear

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Stock analysts sure move quickly. Earlier this month, KeyBanc Capital Markets Managing Director Saul Ludwig lowered Cooper Tire & Rubber Co.'s estimated earnings per share (EPS) for the year to 10 cents.

Cooper "still has to demonstrate its ability to deliver better results in what is a tough environment," Ludwig said at the time.

Less than a month later, Cooper isn't delivering in Ludwig's eyes. New numbers for Cooper include a projected 15 cent loss for 2008. KeyBanc's second-quarter estimate is a loss of 25 cents -- more than double the loss projected earlier.

In addition, the company dropped Cooper's 2009 EPS from 85 cents to 45 cents. But despite the lowered EPS estimates, Keybanc's rating for Cooper remains "Hold."

As for Goodyear Tire & Rubber Co., Ludwig has lowered EPS estimates for 2008 (from $2.45 to $2.00), 2Q 2008 (from 67 cents to 50 cents) and 2009 (from $3.00 to $2.60). Goodyear's rating remains "Buy."

"Our estimate changes reflect continued weak tire demand, higher raw materials with a lag in price recovery, and increased unabsorbed overhead as tire production is reduced for both companies," he says.

"For Cooper, manufacturing issues compound these pressures. In the case of Goodyear, some slowing in Europe has been incorporated, and the VEBA (Voluntary Employee Benefit Association) approval may have a three-month delay versus our previous assumed start date of July 1."

Ludwig says Goodyear "is in good control of its operations and, in light of the environment, is executing its strategy well and should

have a strong recovery whenever the economic winds turn, although timing that is impossible."

Compared to Goodyear, Cooper "is in a less favorable position," according to Ludwig. "The greatest softness in the retail tire market is in light truck tires and low-end private label tires, both in Cooper's product power alley. That is why Cooper is seeing its volume comparatively much worse than that of the overall market.

"Imports are increasingly invading its turf, too," he adds.

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