Goodyear profit gets boost from lower North America costs

date: 10/28/2014

(Reuters) - Goodyear Tire & Rubber Co (GT.O), the largest U.S. tire maker, reported a higher-than-expected quarterly profit as raw material costs fell in North America.

Shares of the company, which sells tires under brands such as Dunlop, Sava and Fulda, rose as much as 10 percent on Wednesday.

The company said it expects to sell 1-2 percent more tires in 2015, allaying some concerns about slowing demand due to softness in many economies.

Manufacturing costs in its North America business, which accounts for 44 percent of its total revenue, fell by $32 million in the third quarter. Margins in the business rose to 10.2 percent from 7.4 percent, a year earlier.

"Clearly we've seen a decrease in raw materials (price) this year. We anticipate we're not going to see a big spike going into next year," Goodyear Chief Executive Rich Kramer said in a conference call with analysts.

Goodyear, which competes with Japan's Bridgestone Corp (5108.T) and France's Michelin (MICP.PA), also said it would benefit from its new, yet-to-be launched products in North America next year.

"They have a number of products that they plan to introduce for the mid-tier segment of the market. It should be a positive, it's one area of the market doing really well," Northcoast Research analyst Nick Mitchell said.

"There are a lot of price conscious consumers who are not capable of paying for a very premium tire, but at the same time they do not want a low-end opening price point tire," Mitchell added.

Goodyear also said it expected its 2014 operating income growth to be closer to the higher end of its previous forecast of 10-15 percent.

However, net income available to the company's shareholders fell to $161 million, or 58 cents per share, in the quarter ended Sept. 30 from $166 million, or 62 cents per share, a year earlier.

Excluding items, Goodyear earned 87 cents per share.

Revenue fell 6.8 percent to $4.66 billion.

Analysts on average had expected earnings of 70 cents per share and revenue of $4.93 billion, according to Thomson Reuters I/B/E/S.

Goodyear's shares were up 6.8 percent at $23.34 in afternoon trading on the Nasdaq.

Up to Tuesday's close, the stock had risen about 6 percent in the past 12 months, while the Dow Jones U.S. auto parts index .DJUSAP fell about 1 percent.