Analysts Lower Estimates on Goodyear and Cooper
Deutsche Bank analysts lowered their estimates on Goodyear and Cooper following what the was reportedly an “abysmal April” for the US business. “Anecdotal reports from our tyre industry contacts suggest that US replacement tyre demand was down again in May following an abysmal April (-9.6 per cent). Weak demand comes at a bad time for tyre producers, many of which were already brimming with finished goods inventory at the end of the first quarter and experiencing huge spikes in raw material costs,” the analysts reported.
The analysts decision to lower their estimates results from the intense raw material cost pressure. According to Deutsche Bank natural rubber prices are up 29 cents/pound since 1 January and up 15 cents since 1 May. “In its October ’05 presentation, Goodyear estimated that every penny per pound increase in Natural rubber equates to $17 million of EBIT, with a 3-6 month lag.”
As a result the bank says it expects a 5 per cent North American volume decline assumption at Goodyear and a 1 per cent decline at Cooper. The analysts had previously assumed growth of 1 and 4 per cent respectively.