May Shipments Meet Expectations

RMA data indicates that replacement tyre shipments to dealers in May were up 1.1 per cent year-on-year (they were down 3.6 per cent in May 2006). According to Deutsche Bank analysts product mix was better in the month, as light truck tyre shipments were up 4 per cent, while passenger tyres were up 0.6 per cent.

As a result the financial analysts supported their earlier assertions that 2007 replacement tyre demand could track “well ahead of 2 per cent,” adding: “We continue to believe our 2007 Goodyear (Buy) and Cooper Tire (Hold) North American volume assumptions are conservative. Cooper is best positioned in our view to beat volume expectations, given over 40 million units of reduced capacity in the low-end tyre market.”

Further, the robust pricing environment in the North American market should more-than-offset any potential risk to volumes. Every percentage point change in volumes and pricing translates to $0.10 and $0.25 in earnings per share for both Goodyear and Cooper, respectively, according to the report.