"Cooper dealers have consistently told us they were buying more Cooper produced tires, and its 15% volume growth in 2Q '12 proved they meant what they said," says Saul Ludwig, a managing director at Northcoast Research Holdings LLC.
Better volume and an "even better" price vs. raw material costs ratio led to what Ludwig calls "a great performance" for Cooper Tire & Rubber Co. in the second quarter.
Where does Cooper go from here? According to Ludwig, up.
"Dealers continue to favor Cooper for its high quality and attractively priced -- and attractive looking -- products. Cooper has successfully moved its mix more towards high performance, SUV and light truck tires, but has priced them below the majors while still delivering comparable performance."
For the third quarter, Ludwig estimates Cooper's volume will increase 5%. "Momentum might suggest a stronger increase, but dealers are holding inventories as low as possible given the pending expiration of the tariff on Chinese imported consumer tires on Sept 26," he says.
"Cooper now owns eight tire factories globally -- three in the U.S., two in China, and one each in Mexico, England and Serbia. While most tires are sold in countries where they are produced, the factory footprint gives it considerable flexibility as to sourcing and also the ability to compete effectively with low cost competitors wherever they may be."
As a result, Ludwig reiterates his company's "Buy" stock rating for Cooper.
Cooper posted net income of nearly $52 million on net sales of $1 billion for its second quarter ended June 30, 2012. For a closer look at its 2Q financials, click here.
