Goodyear to Announce Record Sales, Analysts Say Sell

Goodyear Tire & Rubber Company says it anticipates record sales of almost $20 billion (£11.27 billion) for 2005, with more than $4.9 billion for the fourth quarter. Despite this market analysts, Deutsche Bank, have downgraded their stock rating for the company to “sell.” In addition to record sales, segment operating income is expected to be up between 20 and 25 per cent from 2004.

The manufacturer says it expects fourth quarter segment operating income “to approximate the $238 million achieved in the prior year period.” After deducting $20 million in corporate and general expenses Deutsche Bank estimates consolidated EBIT will come in at “roughly $218 million, well below their $283 million estimate.”

Deutsche Bank reports that it sees several risks persisting into 2006 and 2007, including between contributions to pension funds, debt maturation, raw material costs, the expiration of the company’s union contract. CV tyre production and “additional capacity coming online in high margin markets.” Goodyear said raw material costs increased approximately 13 per cent for the fourth quarter, more than it had anticipated.

“Given the 28 per cent downside from yesterday’s closing price of $18.76, Deutsche Bank is lowering their recommendation to ‘Sell.’ In the meantime Goodyear shares lost more than 9 per cent at Frankfurt’s stock exchange,” the analysts reported.

“Our strong 2005 results show the impact of Goodyear’s innovative new products around the world and improved marketing and give us a solid foundation for the next stage of our turnaround,” said Robert J Keegan, chairman and chief executive officer.

“During the quarter, global product demand, including that for new Goodyear tyres such as Assurance in North America and Ultra Grip 7 in Europe, remained strong and continued to drive a richer product mix,” he said. “We are working worldwide to reduce our costs and working capital needs, as well as to further improve our product and brand mix,” Keegan added. “Nevertheless, the escalating cost of raw materials and currency fluctuations continue to challenge our businesses.”