Goodyear Tire (GT) announced its first price increase in more than a year on the back of higher raw material costs. The company has raised the price of tires sold in North America by 6% on top of a 10% price rise in September last year.
Goodyear has declined to specify the types of raw materials that drove the decision to raise prices. The price increase affects all of Goodyear’s consumer replacement tires as well as dealers and distributors. The company stated the price increases would take effect from Dec 1.
Goodyear failed to impress the investors in its third quarter results. The company posted a net income of $72 million or 30 cents per share in the quarter, which was below the Zacks Consensus Estimate of 47 cents per share. However, earnings improved from the year-ago level of $31 million or 13 cents per share.
Sales for the quarter went down 15% to $4.4 billion. This reflected a 7% decline in unit tire volume due to lower industry demand as well as a $279 million reduction in sales in other tire-related businesses, primarily third-party chemical sales by North American Tire. Unfavorable foreign currency translation further reduced sales by $159 million.
Goodyear is adversely affected by production cuts by original equipment manufacturers due to slow automotive sales. The company projected a fourth-quarter operating loss for its key North American Tire unit. We continue to maintain the recommendation of the shares of the company as Neutral.
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