Cooper Standard (CPS) Q1 2026 Earnings Report
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On March 20th I wrote about Cooper Standard in a deep dive laying out why I believe price is significantly dislocated from value.
And that gap had gotten even wider after a decline that has reached ~38%.
Q1 results released last week reaffirmed the case.
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Financials & Data
Q1 2026 reaffirmed the trajectory CPS has been on for multiple years. Continued cost reductions and steady performance in the face of slow volumes.
Revenue came in at $686.4M, up 2.9% YoY beating estimates by ~3%.
Fluid Handling came in at $318M, up 4.6% from $304M.
Sealing Systems came in at $348M, up 1.5% from $343M.
FX tailwinds helped, partly offset by volume and mix. This marked the sixth consecutive TTM revenue improvement and the highest Q1 revenue since 2019. All in the face of declining production in every geography except South America.
Broken down by region, North America was flat, Europe grew 12.8%, Asia Pacific shrank 1.5%, and South America was flat.
Gross Margin came in at 12% vs 11.4% last year.
Adjusted EBITDA Margin came in at 7.4% vs 8.8% last year.
Adjusted EPS came in at -$0.29 vs $0.19 last year missing estimates of -$0.17.
Margins were down due to $10M of royalty income that did not repeat. Adjust for that and EBITDA would have grown YoY, with EPS $0.13 better.
Free Cash Flow came in at -$93M vs -$22M last year.
The decline came from a -$88M working capital swing, the one off royalty income that did not repeat, and higher capex at 3.5% of sales vs 2.6% in 2025. Management expects working capital to normalize over coming quarters.
Balance Sheet is solid with ~$286M of liquidity available vs $1.1B of 2031 debt.
After the refinancing, interest expense was reduced by $6M annually.
Lean Savings came in at $17M during the quarter.
Cooper Standard has a relentless focus on cost reduction. They have reduced their cost base by well over $700M since 2019.
Net New Business Wins came in at $128M up 133% YoY
$31.8M was tied to EVs and hybrids.
That is well ahead of their $400M annual goal, which management has said they are "well on their way to exceeding." They continue to gain market share globally.
Looking Forward
Cooper Standard's future looks increasingly bright because of management's execution. They agree.
“We believe we will continue this trend of expanding margins in 2026 and beyond, even if production volumes remain flat, and we would expect to leverage any increase in production volume to drive further profitability and returns.”
When asked why they have so much confidence in margins, management went into detail.
Going into 2026, over 90% of the $90M annual lean savings target had already been identified. That is the highest level of pre-identified savings in many years. They are confident the savings will continue into 2027.
On top of that, 2027 and 2028 revenue is more than 85% booked. They know years in advance what products they will make and at what contracted margins. As new wins flow through, they replace older lower margin contracts. Management has a “high degree of confidence” they can keep expanding margins and is “increasingly confident” they will hit longer term targets for growth, margins, and ROIC.
The one thing they cannot predict is volume and mix. Despite a difficult period, they keep relying on the two levers they can control. The result is improvement on the bottom line and now the top line.
For 2026, management sees the volume headwinds of the past two quarters potentially “turning into tailwinds in the back half of the year.” A resolution to the Iran war would add further upside to demand. Either way, they believe they are at least on track or ahead of 2026 guidance.
Gas prices have been pointed to as a demand risk. Management was clear that volumes are coming in as expected.
On oil and aluminum inflation, indexed contracts cover more than 70% of CPS’s exposure. They renegotiate the rest every three to six months, with built in recovery of costs lost in prior periods. Commodity inflation can be a short term headwind, but CPS recovers the costs over time.
Longer term, management targets a doubling of the fluid handling business within five to seven years. Recent wins put them on track. They expect to meet that higher volume with “minimal incremental capital investment.”
Thoughts
Despite recent share price decline Cooper Standard is executing on every goal they have laid out. Margins continue to rise in the face of low production, new business wins are accelerating, and topline is turning positive.
Now we are just waiting on those volumes to turn. The tailwinds for that flip are still in place. Record population, record new drivers entering the market, dealer inventories needing restock, higher tax refunds, car loan interest deductions, and the oldest fleet on record.
