Despite rising tire raw material costs, KeyBanc Capital Markets is reinforcing its "Buy" rating on Cooper Tire & Rubber Co.'s stock.
Managing Director Saul Ludwig says there is a lot to like about Cooper, including the following:
* sharply higher earnings beginning in the third quarter of 2009;
* major cost cutting benefits beginning in 4Q09 and continuing into 2010;
* a reversal of market share losses "leading to volume increases in North America and China" in 4Q09 and 2010; and
* the closing of its costly Albany, Ga., plant, which has stopped all tire production.
According to Ludwig, Cooper has a "great balance sheet with over $300 million in cash and less than $600 million in debt -- none of which is due for several years into the future." He also believes Cooper is the beneficiary of the tariffs on Chinese imported tires.
"We expect to see all of the major tire companies -- and Cooper, too -- announce price hikes soon to take effect in January 2010," he adds. (The price increase would be in addition to Cooper's "up to 12%" increase announced in September.)
