According to Deutsche Bank, Bridgetone’s second half forecasts are overly pessimistic. The company’s projections are also said to assume low production volume and reflect an overly negative “cost-push scenario.” Instead Bridgestone’s strong first half results, which include an increase in turnover of 4 per cent and 29 per cent improvement in the companies operating income, have led analysts to project a more positive outlook and to affirm their advice to buy these shares.
Goodyear may have been in profit for the second quarter and may have posted record sales but not everyone is impressed. Deutsche Bank analysts have pointed out a number of flaws in the company’s optimism.
While the Goodyear shares jumped around 5 per cent to 8.56 US-Dollars on the stock exchange, finance experts have reacted more cautiously. Rod Lache, DB-analyst in New York, doubts whether the contract with the unions or the closing of a factory in the USA last year is sufficient to have a positive effect on the high fixed costs. He expressed surprise that Goodyear’s volumes slipped by 1.7 per cent while the industry gained 3.7 per cent. The value of Goodyear shares is in the region of 6 US-Dollars, according to Deutsche Bank.
The Japanese tyre manufacturer has reported good 1st quarter figures. Demand was better than expected, exports are booming and price increases seem to have stuck. All reasons for Deutsche Bank to recommend the shares as a “buy”.
While the US- Automobile Industry and most of the suppliers could improve their pension fund positions, Goodyear is, according to analysts, an exception. Compared with liabilities of 2.2 billion US-Dollars at the year end 2002; those could now have risen to 3 billion US-Dollars. Analysts from Deutsche Bank do not see potential for Goodyear shares and recommend a
cautious stance. They still have doubts that Goodyear can manage the long awaited turnaround in North America this year despite the fact that the
markets as well as the tyre replacement market have shown strong improvements.
It is better to be a tyre manufacturer in Western Europe rather than the USA, say analysts from the Deutsche Bank. The main reason is that raw material prices, billed in US$, have risen 20 per cent in Dollar terms, but only 3 or 4 per cent in Euro terms. Another advantage is in the performance of the respective tyre markets, with the European replacement truck tyre market in the first four months up 5 per cent (US market up 2 per cent) and the car tyre market in Europe rising 8 per cent, against a 5 per cent decline in the USA.
Deutsche Bank has sold its involvement in Continental AG of which it held 7.5 per cent share valued at 142.3 million dollars to investment groups in Germany, Great Britain, Suisse and USA. The bank also reduced its DaimlerChrysler shares from 12.85 percent (31.12.01) to 11.80 (05.11.02).
McDonald Invest has reclassified Goodyear shares from Buy to Hold. The Deutsche Bank in New York is afraid that Goodyear will show a loss for the year or, at best, break even. The analysts from Deutsche Bank believe that Goodyear has its own particular problems compared with other tyre manufacturers.
Analysts at Deutsche Bank believe that this year Continental could achieve an EBITA of 600 million Euros. The management had forecast 530 million Euro. Although Temic was acquired, indebtedness has been reduced by 300 million Euros. Business in the USA is still bad, with losses of 100 million Euros (and more) expected. The objective of the chairman of Continental USA, Dr. Ulrich Wellen – to break even – seems not likely to be realised, at least in the near future.
In conversation with analysts, Goodyear disclosed that it holds 35 million Goodyear shares in its 401 K Savings Plan, 20 million from salaried employees and 15 million from blue collar workers. This means that Goodyear employees hold 22 per cent of outstanding Goodyear stock. Some analysts, including those from Deutsche Bank, are sticking to their “buy” recommendation.
In light of questions from bidders about the influence of Sir Tom Farmer on the bidding for Kwik-Fit, Sir Tom and two other directors of the business are taking leave of absence during the expected sale of the fast fit chain. Sir Tom has been named as a possible buyer and is rumoured to be backed by HBOS and the Royal Bank of Scotland. One of the potential bidders for the business which employs 11,500 people at 2,400 outlets, is Deutsche Bank’s venture capital division. The interim managing director will be Dominic DiMarco, Ford’s executive director of diversified consumer services.
At its so-called annual strategy day, Michelin had only partly good news to tell. Following the disastrous Firestone tyre recall, the price increases in the US-replacement market appear to have stuck. However, recent price increases in the US truck tyre replacement market have not held and this is squeezing the EBIT margins. For the first time ever, analysts were allowed to see a tyre made by the C3M process. Michelin is convinced that it can increase market share significantly in the UHP market with the help of C3M, while analysts from Deutsche Bank see C3M as a key driver to achieve an EBIT margin of 10 per cent in 2005, compared to 7.6 per cent in 2000.
Deutsche Bank AG sees potential in Michelin shares, which lost about 10 % at the stock exchange last week, and they recommend these as a “buy”. On the one hand analysts foresee cheaper raw material prices and on the other hand they believe that, as Michelin is focussing on the high end of the market, the company will be the winner because American consumers are making a flight to quality after the recall of Firestone tyres.