Ticker | Status | Jurisdiction | Filing Date | CP Start | CP End | CP Loss | Deadline |
---|
Ticker | Case Name | Status | CP Start | CP End | Deadline | Settlement Amt |
---|
Ticker | Name | Date | Analyst Firm | Up/Down | Target ($) | Rating Change | Rating Current |
---|
Thesis: Cooper-Standard (NYSE:CPS) is an auto parts supplier focused on sealing systems, fuel/brake delivery, and fluid transfer systems. The company was severely impacted by the downturn in new car volumes from 2018 to 2022 due to chip shortages, with revenues declining from $3.8 billion in 2017 to $2.3 billion in 2021. However, revenue has begun to rebound, reaching $2.8 billion in sales for 2023. In my view, CPS is just at the starting line; as car volumes revert to normalized levels, operating leverage will be significant, as detailed in the valuation section.
Thesis is based upon:
Valuation: If industry volumes revert to normalized levels, Cooper-Standard should achieve their normalized operating numbers. In 2017, they generated $3.6 billion in sales and $125 million in net income. Assuming a trough 10x P/E multiple, the stock would be worth $70. If they hit their peak multiple of 20x normalized earnings, the stock could reach $140. There is clearly upside potential with the catalyst of increasing car volumes.
From 10k
The company achieved profitability with $11 million in net income 2 quarters ago and is expected to increase this figure due to operating leverage. It's important to note that the company now faces increased interest expenses due to refinancing its debt beyond 2026. The current interest expense is $70 million higher than during normalized years. However, this increase will be more than offset by cost reductions. Additionally, the company can carry over losses from last year, significantly lowering its income tax expense.
Company Overview: Cooper-Standard operates in three main segments: sealing systems, fuel/brake delivery systems, and fluid transfer systems. They are the global leader in sealing systems, second in fuel and brake delivery systems, and third in fluid transfer systems. They manufacture for most large car manufacturers, including Ford (NYSE:F), GM (NYSE:GM), and Tesla (NASDAQ:TSLA). Notably, CPS sells more parts for EVs and hybrids than internal combustion engines. This reduces the EV risk for Cooper-Standard and serves as a catalyst for growth. If EVs and hybrids become more popular, CPS's earnings projections may be conservative.
From 10k
Risks:
U.S. recession: A deep recession could decrease new car purchases. However, the average car age is at an all-time high, indicating pent-up demand. OEMs are likely to compete for market share by slashing prices, benefiting consumers. Additionally, new car financing offers lower rates than used car dealers, making new car purchases more attractive.
I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.
Disclaimer:
This stock pitch is provided for informational purposes only and is not intended as investment advice. The analysis and opinions presented here are based on publicly available information as of the date of preparation and may be subject to change. The author, Andrew Marasco, is not a licensed financial advisor, and readers are encouraged to conduct their own research and consult with a qualified financial professional before making any investment decisions.