Merrill Keeps 'Neutral' on Cooper Tire

An analyst says the company's decision to explore the sale of its auto business is positive

Merrill keeps its neutral rating on Cooper Tire & Rubber (CTB ).

An analyst says Cooper's auto business accounts for half of revenue and earnings, and that the potential divestiture is surprising since it's a reversal in the company's strategy. Cooper now believes growth prospects are greater in replacement tires than supplying auto makers with sealing and vibration controls products.

The analyst agrees, and says there's probably an ample number of potential buyers for the property. The analyst expects some of the proceeds will be reinvested in the tire business, and believes the shift from diversification back to specialization should strengthen Cooper's competitiveness in the global replacement market.