Analyst Actions: UPS, Cooper Tire & Rubber

Analyst Actions: UPS, Cooper Tire & Rubber

BAIRD DOWNGRADES UPS TO NEUTRAL FROM OUTPERFORM

Baird analyst Jon Langenfeld says he expected weaker-than-consensus results at United Parcel Service (UPS) given rising fuel prices and FedEx (FDX) results last week, but the magnitude of the miss is larger than anticipated.

In addition to weak domestic economy and record-high fuel surcharges, slowing U.S. imports also hurt results. A further issue is that fuel surcharges for domestic Express averaged 24% in the second quarter (vs. 19% in the first quarter), and are on pace to average 34% in the third quarter.

Langenfeld cuts $3.93 2008 EPS estimate to $3.40 and $4.60 for 2009 to $3.75. He thinks further downside risk exists without stabilizing fuel and demand trends. He still favors UPS over FDX, but sees added risk to both companies' earnings profile if fuel remains at current levels.

BB&T CAPITAL CUTS ESTIMATES FOR COOPER TIRE & RUBBER

BB&T analyst Anthony Cristello says Cooper Tire & Rubber (CTB) has curtailed production in its North American facilities due to ongoing soft demand and a projected shortage in a key raw material (butadiene) used in the synthetic rubber process; hence, CTB expects to incur $12-$14 million in unabsorbed costs for the second quarter 2008.

To reflect this guidance, Cristello widens $0.22 second quarter loss estimate to $0.34 loss; cuts $0.01 third quarter EPS to $0.05 loss, and $0.19 fouth quarter EPS to $0.15 EPS; he sees $1.05 2009 EPS.

He notes that CTB's previously announced 8% price hike set to go into effect July 1 may have greater benefit should industry trends improve while inventory levels remain lean, thereby reducing the chances for a pushback by customers. He keeps a buy recommendation on the stock.