CLEVELAND (Oct. 21, 2003) — McDonald Investments has upgraded Cooper Tire & Rubber Co.'s stock rating from “hold” to “buy” based on new business and low-cost sourcing from China, among other factors.
Analyst Saul Ludwig said he raised the outlook because general tire demand is beginning to improve, and Cooper's 2-4 percent price increase has taken hold. Also, the sourcing arrangement with Hangzhou Zhongce Rubber Company Ltd., in Hangzhou, China, will garner 250,000-350,000 radial medium truck tires annually, Cooper previously announced. In a recent conference call, Cooper Chairman Thomas Dattilo said the tire maker plans to continue increasing Asian sourcing in 2004, and soon the tire maker may buy or produce as much as 20 percent of its products in low-cost countries.
Mr. Ludwig also cited Cooper's involvement in the Ford F-150 platform. Mr. Dattilo told analysts production of the pickup truck will be about 130,000 units in the fourth quarter, with more than 600,000 more in 2004. He said Cooper's content on the upgraded pickup is “dramatically” higher than the old version of the vehicle.
“(Cooper) received additional business, which puts them in a very good position for demand and capacity utilization next year,” Mr. Ludwig told Tire Business.
On Oct. 16, Cooper reported third quarter earnings of $17.8 million on an 8.8-percent increase in net sales. The Tire Group also reported record net sales of $525.8 million, up 13.2 percent from $464.4 million in the same period last year. Total tire unit sales increased by 11 percent, Cooper said. In the conference call, Mr. Dattilo said he expects Cooper's market share in high performance tires to increase to about 15 percent in a few years, up from 3 percent in 2002.