Goldman Downgrades Cooper Tire & Rubber, Initiates Titan International

In a report published Wednesday, analysts at Goldman Sachs downgraded

from Neutral to Sell, while initiating coverage of

with a Neutral rating. The price target for Cooper Tire & Rubber was lowered from $37 to $33, while the price target for Titan was set to $12. The analysts expect Cooper Tire & Rubber to witness further downside, following its weak 1Q15 earnings. Lack of traction in Europe and low exposure to China are likely to continue to adversely impact the company's international operations. On the other hand, competition in the U.S. is also re-intensifying. "While we still see market share gains for Cooper's products resulting from the tariffs on import tires from China, we expect incremental competition from tire manufacturers with production in Southeast Asian countries looking to benefit from the continued solid US demand and favorable environment created by the tariffs," the analysts said. Titan International's stock, on the other hand, is expected to continue trading flat at the current levels while the company works through the demand troughs in Ag and mining. "While we believe long term investors could be rewarded by a potential global ag or mining rebound, with little visibility to improvements in end markets we remain on the sidelines," Goldman Sachs explained. The analysts expressed their concerns regarding the company's high revenue exposure to the global Ag market. In addition, the decrease in capital spending on earthmoving equipment and the surplus global capacity in terms of mining tires are likely to adversely impact Titan International's performance, going forward. "With no up-turn in sight following a multi-year expansion cycle, in combination with incremental agriculture tire capacity coming on-line globally, we expect only sustained levels of replacement tire demand at present in an environment that could become increasingly competitive given over-supply," the analysts added.