Cooper-Standard Misses on Q3 Earnings, Reduces '24 Sales Outlook

Cooper-Standard Holdings Inc.’s CPS third-quarter 2024 results reflect the negative impacts of industry-wide pressures and operational headwinds, which weighed on its financial performance. With persistent inflationary trends and foreign exchange hurdles, the company grappled with softer vehicle production levels, influencing its sales and profitability metrics.Despite these obstacles, Cooper-Standard has been focused on cost-saving initiatives and is making strides in securing new contracts, particularly in the growing electric vehicle segment. This emphasis on future-focused projects, coupled with revised guidance to reflect the current economic landscape, highlights the company’s ongoing adaptability amid fluctuating market conditions.Cooper-Standard Holdings Inc. Price, Consensus and EPS Surprise  Cooper-Standard Holdings Inc. price-consensus-eps-surprise-chart | Cooper-Standard Holdings Inc. QuoteQ3 ResultsCPS reported an adjusted loss of 68 cents per share for the third quarter of 2024, marking a 180% decline from adjusted earnings of 85 cents per share in the same quarter of 2023.The company’s quarterly sales of $685.4 million decreased 6.9% from $736 million in the prior-year quarter due to a combination of reduced production volume, an unfavorable foreign exchange environment and the absence of certain commercial settlements in the third quarter of 2023.Segmental PerformancesSealing Systems: Sales for the segment reached $353.4 million in the third quarter of 2024, a 4.7% decrease from $371 million in the year-ago quarter. The decline was led by reduced volume and a negative impact of foreign exchange rates, offset partly by customer price adjustments. The adjusted EBITDA for Sealing Systems declined 24.5% year over year to $29.9 million.Fluid Handling Systems: Sales dropped 8.2% from $341.8 million in third-quarter 2023 to $313.7 million in the third quarter of 2024. Lower production volume, an adverse currency exchange rate and a lack of settlements from the prior year contributed to this decline. The adjusted EBITDA for Fluid Handling Systems saw a sharper year-over-year drop of 44% to $23.1 million.The reduction in adjusted EBITDA was attributed to lower production volumes and unfavorable currency exchange, partially counterbalanced by cost-saving measures through lean manufacturing initiatives.Profitability MetricsThe gross profit margin declined as gross profit dropped to $76.3 million in the reported quarter from $106.5 million in third-quarter 2023, reflecting lower sales volumes and the impacts of inflation on costs. This margin compression indicates the pressure on profitability from reduced production volumes and foreign exchange losses.Operating income for third-quarter 2024 fell to $23.5 million from $52.7 million in the prior-year period due to lower sales and increased cost pressures. The operating margin declined accordingly, mirroring the effects of these adverse factors on core operating profitability.The adjusted EBITDA also saw a sharp decline to $46.1 million (6.7% of sales) in third-quarter 2024 from $79.1 million (10.7% of sales) in the prior year.The adjusted EBITDA margin dropped from 10.7% in third-quarter 2023 to 6.7% in third-quarter 2024, primarily impacted by the absence of the previous year’s commercial settlements and a challenging foreign exchange environment. This decline in the EBITDA margin underscores the difficulties Cooper-Standard faces in maintaining profitability amid lower revenues and cost headwinds.Cost AnalysisThe cost of goods sold decreased to $609 million from $629.5 million in third-quarter 2023, as a result of the reduced production volume, while gross profit fell to $76.3 million from $106.5 million in the prior-year period. SG&A expenses were nearly flat at $49.7 million, showing effective cost management despite the challenging economic environment. Lean initiatives continued to deliver planned savings, positively impacting the overall cost structure and partially offsetting inflation and currency challenges.Cash, Debt & Capital ExpenditureAs of Sept 30, 2024, Cooper-Standard held cash and cash equivalents of $107.7 million, down from $154.8 million at the end of 2023. Total liquidity stood at $280.8 million, providing adequate resources for ongoing operations. The company’s capital expenditure for third-quarter 2024 was $10.9 million, and the free cash flow improved to $16.9 million from $4 million in third-quarter 2023.Management GuidanceCooper-Standard adjusted its 2024 guidance due to the industry’s softer vehicle production outlook and continuing inflationary headwinds. The revised sales expectation is at $2.7-$2.75 billion, slightly down from the previously mentioned $2.8-$2.9 billion. The adjusted EBITDA forecast was reduced to $180-$195 million from the prior stated $180-$210 million. Capital expenditure guidance was lowered to $45-$50 million, reflecting the company’s focus on maintaining liquidity.Other DevelopmentsIn third-quarter 2024, Cooper-Standard announced new business awards totaling $44 million in anticipated annualized revenues, with $32.3 million tied to battery-electric vehicle platforms and $7.9 million to hybrid platforms, underscoring the company’s strategy to capitalize on the shift to electric vehicles.Research Chief Names "Single Best Pick to Double"From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. 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