Goodyear Tire & Rubber Co. (GT) will release its sales and earnings results for the third quarter before the markets open on Wednesday, Oct 28. The Akron, Ohio-based tire manufacturing company – one of the largest worldwide – reported a net loss of $221 million or 92 cents per share in the second quarter of 2009, worse than the Zacks Consensus Estimate loss of 72 cents per share. The company reported earnings of $75 million or 31 cents per share in the same quarter a year back.
Total segment operating income plummeted 93% to $24 million in the second quarter from $330 million in the prior-year quarter. This can be attributed to continued weak demand that resulted in a negative volume impact of $129 million and under-absorbed fixed costs of approximately $250 million prior to a restructuring actions benefit.
However, Goodyear witnessed a sequential improvement in segment operating income over the first quarter ($176 million loss) due to higher sales, moderating raw material costs and cost-reduction actions.
For the upcoming quarter, Goodyear is expected to show profits in its books. The Zacks Consensus Estimate for the company is ticked at 47 cents per share, reflecting a significant improvement from recorded earnings in the previous quarter. This is due to several factors including its cost reduction efforts and growth strategy.
Goodyear remains focused on the twin goals of top-line growth and cost reductions. The top-line growth incorporates an unprecedented number of product launches in 2009 and beyond, with more than 50 new tires being introduced globally. Goodyear aims to tap significant growth opportunities in emerging markets such as Latin America, Eastern Europe and Asia. For 2009, Goodyear Tire has targeted a double-digit growth in the Eastern Europe, African and Middle Eastern (EEAME) region as demand for premium products continues to increase.
Goodyear sells its tires under the Goodyear, Kelly, Dunlop, Fulda, Debica, Sava and various other “house” brands (such as Lee, Kingstone, Douglas, Mohave and Republic) as well as private-label brands (such as Roadhandler, Star and Monarch). The company also undertakes automotive repairs and provides other services through more than 1,600 tire and auto service centers. It has manufacturing operations at more than 61 facilities, which are spread across 25 countries.
We continue to recommend the shares of Goodyear as Neutral.
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