Despite a "terrible" year in 2008, Cooper Tire & Rubber Co. is holding firm with KeyBanc Capital Markets and BB&T Capital Markets.
The book value of Cooper's stock price on Dec. 31, 2008, was $4.98, which was worse than KeyBanc's prediction of $6.00. Book value at the end of 2007 was $13.
"Anyway you look at it, 2008 was a terrible year for Cooper Tire," says KeyBanc Managing Director Saul Ludwig.
He says Cooper will continue to lose market share and incur higher pension costs. "Unabsorbed overhead will remain a problem for much of the year and finally, its operations in England and China will be challenged as volume will be far less than Cooper's capacity."
Ludwig adds that Cooper's liquidity remains strong, "so we believe Cooper can withstand the harsh environment we see for the tire industry this year." As a result, KeyBanc's rating for Cooper remains "Hold."
BB&T's rating of Cooper's stock remains "Hold 2." According to Anthony Cristello, senior vice president of equity research, Cooper performed worse than the market in 2008 -- and the market declined more than expected. "Although we anticipated the weakness in (overall) North America volumes... and expected to see moderation in international shipments, we did not anticipate a decline of this magnitude.
"Unfortunately, replacement demand has shown no signs of improvement to date, with January RMA volumes down 19% for passenger cars and 30% for light trucks. At some point, replacement demand will return -- the only question is, when?"
Cristello believes it is "unlikely" Cooper will turn a profit in 2009. The company has "a significant amount of fixed cost in tire production -- a problem when volumes are so weak.
There are positive signs, however. "The shutdown of the company's Albany, Ga., facility reflects the company's efforts to cut costs, run leaner, and preserve margins, with savings ($75 million to $80 million annually) building momentum as 2009 progresses," he says.
In addition, Cooper "should also benefit from lower raw material input costs."
