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Why Shares of Cooper Tire & Rubber Co Revved Higher

By Jeremy Bowman - Mar 14, 2014 at 7:06PM

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Is this meaningful? Or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Cooper Tire & Rubber Co ( CTB ) were peeling out today, gaining as much as 11%, and finishing up 7% on a strong fourth-quarter earnings report.

So what: The tire maker said sales declined 19%, to $861 million, well ahead of estimates at $774.3 million, while earnings of $0.31 beat the experts' view of $0.26. Cooper delivered its second-highest full-year operating profit in the company's 100-year history, and CEO Roy Armes said the company's performance was "a testament to the resilience of our business model." Profits and sales were down year over year due to a labor standoff at its joint venture in China, an unfavorable sales mix, and higher manufacturing costs; but, with strong beats on top and bottom lines, Cooper rose to the occasion.  

Now what: For the current year, management did not provide guidance, but it said it expects first quarter raw material costs to decline 3% and then rise over the long term. Armes also said, "The challenges of 2013 are largely behind us," and that Cooper should see unit volumes recover and grow at a rate equal to or greater than the industry. Analysts are expecting flat revenue, but the company should see some sales growth on higher volumes, which could send shares higher.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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