Shares of Michelin & Cie., the world's second-largest tire maker, rose the most in six weeks in Paris trading after Merrill Lynch upgraded the stock because of declining oil prices and the prospect of growth in replacement tire sales.

Michelin on Tuesday gained 2.42 euros ($3.52), or 5.4 percent, to 46.78 euros ($67.94), its biggest increase since July 17. The stock has fallen 40 percent this year, valuing the company at 6.78 billion euros ($9.91 billion).

Even as car and truck sales in Europe and North America decline, lower oil prices ''should progressively support a recovery'' for Michelin as the company spends less on raw materials while revenue rises as motorists replace tires on aging vehicles, London-based Merrill analyst Thomas Besson wrote in a report raising his recommendation to ''buy'' from ''neutral.''

Tire makers' earnings have been hurt by soaring prices for supplies, including natural rubber, steel and oil.

Michelin's share-price tumble has accelerated as the Clermont-Ferrand, France-based company scaled back earnings forecasts twice this year, including scrapping the 2008 target on July 30.

Oil and rubber prices will continue to have a ''strong impact'' on Michelin shares in coming weeks, Besson said. ''With oil down nearly 25 percent from its July peak, consensus earnings expectations should
go up again.''

Michelin could also gain as investors exit Continental AG, which last month endorsed an offer by smaller German car component maker Schaeffler Group to acquire almost 50 percent of its capital for 75 euros ($108.93) per share. Hanover, Germany-based Continental ranks second in tire making in Europe, after Michelin.

''Investors who have tendered their Conti shares on Sept. 16 to Schaeffler will need to reinvest the cash in another stock,'' Besson said. ''Michelin should benefit from part of this flow.''

Merrill Lynch cut its recommendation on Continental to ''underperform'' from ''neutral'' in a separate note Tuesday, predicting the stock will fall to 60 euros ($87.14) after the expiration of Schaeffler's offer and a probable cut in the company's earnings objectives as auto parts sales decline. Continental was down 5 cents, or 0.1 percent, at 74 euros ($107.48) in Frankfurt trading.

Merrill Lynch raised its price projection for Michelin shares to 63 euros ($91.50) from 50 euros ($72.62) and increased its estimates for earnings per share in 2009 and 2010 by 4.5 percent.

Michelin also announced price increases of 3 to 5 percent, effective Oct. 1.