Goodyear Tire & Rubber Company
) reported a profit of $97 million or 39 cents per share in the
fourth quarter of 2012 that significantly rose from $6 million or
3 cents in the same quarter of 2011 (all excluding special
With this, the company has beaten the Zacks Consensus Estimate
of 21 cents per share. Including special items, the tire maker
had a breakeven 2012-fourth quarter, which compared with a profit
of $18 million or 7 cents per share in the 2011 quarter.
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Revenues dipped 11.2% to $5.0 billion owing to $338 million in
lower tire unit volumes, $221 million in lower sales in other
tire-related businesses, mainly third party chemical sales in
North America, and $85 million in unfavorable foreign currency
translation. It was lower than the Zacks Consensus Estimate of
$5.4 billion. Tire unit volumes declined 7% to 40 million,
primarily due to lower volumes in Europe.
However, operating income surged 39% to $272 million. The
increase was attributable to $191 million in lower raw material
costs (prior to the benefit of cost savings actions), improved
price/mix of $20 million and positive impact from cost-reduction
measures, partially offset by $57 million in lower tire volume
and associated unabsorbed overhead costs of $119 million.
Sales in the North American Tire segment shrank 10% to $2.3
billion due to a 5% fall in tire unit volume, 10% decrease in
replacement tire shipments and lower third party chemical sales
(which reduced sales by $161 million), partially offset by a 9%
rise in original equipment volumes.
Operating income improved significantly by $95 million to $116
million driven by a $150 million of positive impact of lower raw
material costs and $20 million in savings related to the closure
of a tire plant in Union City, TN, partially offset by lower
volume and unabsorbed overhead from related production cuts
impact of $77 million.
Sales in the Europe, Middle East and Africa Tire segment fell 16%
to $1.6 billion due to a 15% fall in tire unit volumes, 17%
decrease in replacement tire shipments, 9% decline in original
equipment unit volume and unfavorable foreign currency
translation of $48 million, partially offset by improved
Segment income ebbed 56.8% to $38 million. The decrease was
attributable to negative impact of $126 million due to lower unit
volume including the impact of unabsorbed overhead from related
Sales in the Latin American Tire segment dropped 9% to $541
million due to a 6% fall in original equipment volumes and
unfavorable foreign currency translation of $37 million,
partially offset by a 2% rise in replacement tire shipments.
However, segment income escalated 27.1% to $61 million. The
increase was attributable to price/mix improvements of $35
million and lower raw material costs, partially offset by higher
production costs owing to higher wages and other costs.
Sales in the Asia-Pacific Tire segment slid 0.5% to $588 million
driven by a 1% fall in replacement tire shipments, unfavorable
foreign currency translation and lower price/mix, partially
offset by a 6% rise in tire volumes and 14% increase in original
Segment operating income rose 46.2% to $57 million due to $29
million in lower raw material costs and higher volumes. It was
negatively affected by $7 million in lower price/mix, $6 million
rise in costs related to the start up of a new facility in China,
higher wages and other costs as well as unfavorable foreign
Goodyear posted a decline in profits to $183 million or 74 cents
per share in 2012 from $321 million or $1.26 per share per share
in the prior year. With this, the company has missed the Zacks
Consensus Estimate of $1.65 per share.
Sales in the quarter fell 8% to $21 billion, nearly meeting the
Zacks Consensus Estimate of $21.3 billion. The decrease was
driven by unfavorable unit volume and foreign currency
translation, which reduced sales by $1.6 billion and $766
million, respectively, and lower sales in other tire related
businesses, mainly third party chemical sales in North America,
which reduced sales by $489 million. These were partially offset
by strong price/mix.
Segment operating income dipped 8.8% to $1.2 billion due to
weaknesses in Europe, partially offset by improvement in the
company's North American Tire segment and improved price/mix.
Goodyear had cash and cash equivalents of $2.3 billion as of Dec
31, 2012, a decrease from $2.8 billion as of Dec 31, 2011.
Long-term debt and capital leases were $5.0 billion as of Dec 31,
2012 compared with $4.9 billion as of Dec 31, 2011.
Goodyear expects full-year tire unit volume to grow at a low
single digit rate in 2013. The company expects the consumer
replacement market to be flat to up 2% and consumer original
equipment to be up 5% in North America. It expects commercial
replacement and original equipment volumes to remain at 2012
levels in the region.
In Europe, Goodyear anticipates consumer replacement industry to
be flat to up 2% and consumer original equipment to be down 5%.
The company expects commercial replacement demand to increase 5%
and original equipment volumes to be flat to up 5%.
Goodyear lowered its operating income guidance to $1.4
billion-$1.5 billion for 2013 from the prior outlook of $1.6
billion. However, the restated operating income still reflects
more than 12% increase over 2012. The downward revision was
mainly driven by weaknesses and related production cuts in
Europe, time required to execute the announced restructuring in
Amiens, France, and the recently announced devaluation of the
bolivar fuerte in Venezuela.
Goodyear plans to exit the farm tire business in the Europe,
Middle East and Africa region. The company has initiated a plan
to shut down the Amiens North plant in France, which produces
consumer and farm tires. The move would eliminate about 6 million
units of high-cost capacity and result in about $75 million of
annual profit improvement.
Goodyear Tire & Rubber Company is one of the largest tire
manufacturing companies worldwide, selling its products under the
Goodyear, Kelly, Dunlop, Fulda, Debica, Sava and various other
"house" brand names as well as private-label brands. The company
currently retains a Zacks #4 Rank (Sell).
While we like to avoid Goodyear, stocks that are worth looking
for in the same industry include
Commercial Vehicle Group Inc.
). They carry a Zacks Rank #1 (Strong Buy).