US Motorists Driving Less
A sharp drop in the amount US motorists are driving, coupled with continued raw material price pressures has led financial analysts to lower US manufacturers earning predictions. Estimated vehicle miles travelled on all US roads declined 4.3 per cent year-on-year in March, according to the US Federal Highway Administration. The drop is apparently the steepest in the history of the data. This coupled with concerns about the effect of increasing raw material costs led Detusche Bank analysts to write: “In the near term, the combination of hyper-inflating raw material costs and weak demand will present major challenges for the tyre industry.”
“While we continue to see robust pricing behaviour within the industry, with price increases of “up to 8 per cent” having been recently announced by Goodyear (effective June 1) and Cooper Tire…we note that pricing may not completely offset raw material cost inflation in every quarter.”
As a result Deutsche Bank has adjusted its 2008 and 2009 earning per share estimates for Cooper Tire to $0.12 and $1.20 from $0.82 and $1.45. “Weaker industry volumes will also challenge Cooper’s plans to export increased production from the company’s new tyre manufacturing joint venture in China,” the analysts wrote, explaining that they are also adjusting their estimates for Goodyear to $2.48 and $3.01 from $2.83 and $3.53 respectively.