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Cooper's 3Q Results Are Down, But Solid, Says Analyst

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One day after Cooper Tire & Rubber Co. released its third-quarter financial results, one industry analyst described them as "very solid."

Nick Mitchell, senior vice president of research for Northcoast Research Holdings LLC, says despite a 4% drop in sales, both in the Americas and overall, Cooper Tire reported very solid results, as adjusted EPS (earnings per share) increased 11.8% from the prior year’s period to $1.04.

"The adjusted results exclude the impact of non-cash pension settlement charges recorded in 3Q16 related to an optional lump-sum payment of benefits offered to certain former employees," he says.

He breaks out the numbers as follows:

* Net sales decreased 4% to $750.9 million "versus our estimate of $791.9 million and consensus of $791.0 million."

* Shipments decreased 0.1% in the Americas Tire Operations segment "versus our estimate for an increase of 3.5%, with growth in Latin America and across Cooper branded products in the U.S. being offset by ongoing challenges with the private label wholesale business."

* Net sales in the Americas Tire Operations segment decreased 4.2% to $672.6 million "versus our estimate of $713 million and consensus of $699 million. The segment’s operating income was basically flat at $101.5 million versus our estimate of $111.5 million."

* Sales in the International Tire Operations segment declined 5.1% to $112.8 million "versus our estimate of $117.4 million and consensus of $122 million. The segment reported operating income of $3.3 million versus our estimate for a breakeven performance and the $5.3 loss recorded in the previous year."

With raw material costs expected to drop, Mitchell still believes Cooper Tire's shares remain undervalued. "As such, we are maintaining our "Buy" rating and $42 price target."

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