Tony Cristello, senior vice president, equity research for BB&T Capital Markets, is reiterating the company's Buy (1) rating for Cooper Tire & Rubber Co.
"We are raising our first-quarter 2010 assumptions for price and mix to 3.4% (from -4.5%) and volumes to 13% (from 12%), which still may prove conservative," he says. BB&T's earnings per share estimates for Cooper stock also have been raised:
* from $0.11 to $0.24 for 1Q 2010;
* from $2.25 to $2.38 for the full year.
Cristello says the tiremaker should continue to benefit from a favorable operating environment.
"Cooper should benefit from the continued strength in overall tire demand in the United States, as RMA light vehicle replacement tire shipments appear to have increased by 13% year to year in the month of March following double digit growth in February."
The rising cost of raw materials is not a concern at present, he says.
"For now, we think that the combination of recent price increases coupled with a continued favorable mix have been more than enough to offset raw material pressures. Also, it would not surprise us to see yet another price increase go into effect beginning in May."
Cristello says Cooper is "likely outpacing the industry" in terms of unit shipments within North America this year.
"Cooper’s results are being positively impacted by the implementation of the tariff on tires imported from China, as well as new product launches to reposition (its) portfolio more in line with current consumer demand."
