Analysts Bullish On Tyre Shares

Some expert followers of the world’s stock exchanges are recommending the shares of tyre manufacturers as a good buy, after months of warning about the negative impact of increasing raw material costs, mostly due to the rise in the price of oil (rubber and carbon black prices rose as well). What has caused this change of attitude? Firstly, oil prices have stopped rising and it is believed that this will inevitably have a knock-on effect on raw material costs; even if they do not fall or stabilise, then the rate of increase will be slower than was feared a while ago. Factor number two concerns the recent price increases in the US market, announced by more or less all the major tyre manufacturers.

These increases (in some cases up to 5%) appear to be holding firm. The combination of lower (or stable) raw material costs and higher prices for the product makes the sector’s shares attractive, say pundits. However, some experts qualify this attitude with a word of warning concerning the performance of Goodyear.

Not only has the company suffered due to unfavourable currency conditions (although admittedly Goodyear is not alone in this) but experts say that the company did not fulfil its potential during the first three months of the year. Low fill rates had left dealers low on stock and it was expected that sales would increase significantly as dealers stocked up when the product became available, however, this did not happen to ant great extent. Analysts believe that the effects of the inevitable on-going restructuring in Europe will have a negative impact on the company.