Los Angeles based Cooper Tire & Rubber Company (CTB) bested analyst earnings estimates during its fourth quarter of 2007, which ended on December 31, 2007. The leading tire maker credits improved pricing measures and effective cost-cutting for the huge profit jump over the fourth quarter of 2006.
The company’s 82 cents per share net income, or $51 million, easily outpaced the 45 cents per share earnings from last year’s fourth quarter. Sales were up $50 million, moving from $715 million to $765 million. Operating income was 43 cents per share, a strong 5 cents over the 38 cents per share analysts had estimated.
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Cooper’s performance gave its stock help as stock trading moved the stock forward about 2% immediately following the announcement. The company chose not to offer a future earnings outlook but did comment that it expects its strong company turnaround to continue through 2008.
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One of the market challenges Cooper faces is continued climbs in materials prices which has lead the company to rise prices for its tires. The company seems confident that its strong quality reputation will allow it to maintain consistent sales growth in spite of the potential for slightly higher prices.
Analysts seem hopeful about the company’s stock future. A one year target price of $24.92 has been set. Currently, investors holding Cooper in their trading portfolio would net a little over $20 for their stock. By not providing a future earnings outlook, the company has made it a bit challenge for investors attempting to do stock research. Many investors like to have an idea of what a company expects in the next quarter compared with the current quarter and prior year.
Cooper’s seems to be a reasonable long-term stock trading strategy pick given the room for stock price increases, as well as the 42 cent dividend yield the company just announced. Covered call investing may be an option for some investors. Cover calls are short-term neutral strategy plays for investors positioned long on a stock, but looking to make short-term profits before the stock price moves up.
Mad Money’s Jim Cramer has recently been bearish on his outlook for the company, but investors seem inspired by the company’s consistent sales and impressive earnings. The company seems confident by its offering of the annual dividend. As a trade example, investors currently holding the stock at $20.17 could gain $4.75 per share over 12 months if the stock reaches its one year target. Investors would also collect the 42 cents in dividend over the year, providing a strong overall return on investment.
As part of its ongoing business strategy, Cooper has elected to follow the approach that has helped some other leading tire companies pull out of slumps. They have decided to pull out of some of the lower-end, lower margin tire products and focus on higher-end, higher margin tires. Along with cutting some of its overhead costs, the company has been able to be profitable by increasing costs on its higher end tires and providing consistently quality. This makes it a good fit for a stock market portfolio.
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