Please ensure Javascript is enabled for purposes of website accessibility

Why Cooper Tire & Rubber Co's Shares Plunged 11% Today

By Travis Hoium - Apr 27, 2017 at 3:49PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Higher raw material prices resulted in Cooper Tire & Rubber reporting a quarter that left a lot to be desired for investors.

What happened 

Shares of tire manufacturer Cooper Tire & Rubber Co (CTB) fell as much as 11.3% in trading Thursday after reporting earnings for the first quarter of 2017. Shares were still down 9.9% at 2:40 p.m. EDT and showed no signs of recovery. 

So what

Unit volume increased 2.9% versus a year ago, but net sales fell 1% to $643 million and net income dropped almost in half to $30.6 million, or $0.57 per share. Analysts were expecting $687.9 million in revenue and $0.74 per share in earnings. 

Tires lined up outside at sunset.

Image source: Getty Images.

Management pointed to a competitive pricing environment and a $50 million increase in raw material costs as the reason results were down in the quarter. These hit Cooper Tire & Rubber especially hard because it uses a last in-first out accounting method in the U.S., meaning it used high cost materials while low cost materials sit on the balance sheet. 

Now what

Most of the pressures facing Cooper today are out of its control, but that's not much consolation for investors. Management is also adjusting by raising prices, which it hopes will stem some of the pressure on the bottom line. On the bright side, international volume was strong and if that continues it should offset some of the pressure in the U.S. Long-term, Cooper is still a leading tire supplier with a profitable business long-term, so today's dip in earnings and shares is a great buying opportunity for investors. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Cooper Tire & Rubber Company Stock Quote
Cooper Tire & Rubber Company
CTB

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
321%
 
S&P 500 Returns
111%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.