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Longbow Downgrades Cooper Tire & Rubber On Volume, Pricing Risks

Longbow Downgrades Cooper Tire & Rubber On Volume, Pricing Risks
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Longbow Research's U.S. channel checks over the past 30 days have given the sell-side firm reason to be cautious about Cooper Tire & Rubber Co (NYSE: CTB) meeting or beating earnings expectations in 2018, the firm said in a Tuesday note.

The Analyst

Longbow analyst Anthony Deem downgraded shares of Cooper Tire & Rubber from Buy to Neutral with no assigned price target.

The Thesis

Over the past 30 days, greater-than-expected price and volume pressure has been observed in the U.S. channel — a likely indicator of further margin suppression in 2018, Deem said.

Near-term margin risks include greater promotional activity, high inventory, weaker-than-expected production schedules and negative industry shipments, the analyst said. 

Longbow lowered its annual price/mix estimates by $15 million, the equivalent of a 23-cent EPS impact. 

"Manufacturers in the U.S. are battling for share in a negative market, leading to greater discounting in February-March," Deem said. 

Longbow also lowered its 2018 volume estimate in the Americas from 0 percent to negative 2.5 percent on the basis of weaker-than-expected shipments and a more competitive pricing environment.

Other risks include raw material inflation in 2018 and an increasingly imbalanced demand-supply equation in North America, Deem said. 

Longbow said it no longer believes Cooper TIre can regain lost market share in the Americas in 2018. A new channel strategy and the ramp of the Chinese GRT plant appear insufficient to offset weaker-than-expected U.S. fundamentals, Deem said. 

The Price Action

Cooper Tire & Rubber shares were down about 21 percent over the past year until Monday. The stock was plunging a further 4.5 percent late in Tuesday's trading session. 

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Latest Ratings for CTB

Mar 2018Longbow ResearchDowngradesBuyNeutral
Feb 2018JP MorganMaintainsOverweightOverweight
Jan 2018Longbow ResearchInitiates Coverage OnBuy

View More Analyst Ratings for CTB
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Posted-In: Anthony Deem Longbow ResearchAnalyst Color Downgrades Analyst Ratings Best of Benzinga


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