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Do IT this week: Layering
By Jim Mackinnon
Beacon Journal business writer
POSTED: 09:28 p.m. EDT, Oct 28, 2009
Goodyear reported its first profitable quarter since 2008 and promptly saw share prices drop the most in 22 years.
The culprit: Much lower income is expected for the rest of this year from Goodyear's key North American Tire division.
Executives on Wednesday said they anticipate, for a number of reasons, that Goodyear's largest division will have between $75 million and $125 million less income in the current quarter compared to the third quarter.
Goodyear's stock closed down $3.28, or 19.6 percent, to $13.46, making it the worst performer Wednesday in the Standard & Poor's 500 Index.
Share prices fell by $4.74 at one point, which sent the price briefly to $12. Shares are up 125.5 percent since Jan. 1 — well up from the year low of $3.51 on March 6 — and are up 56.5 percent from a year ago. The drop sheared $794 million off Goodyear's market capitalization, or value of the company, to $3.25 billion. (Market cap is defined as the stock price times the number of outstanding shares.)
But executives told industry analysts in a conference call that they expect the Akron tire maker will have a stronger financial performance in 2010 because of ongoing efforts to improve profitability combined with an expected global economic recovery.
Including the North American Tire projections, fourth-quarter results are expected to be in line with the company's plans and ''significantly improve'' from a year ago, Chief Financial Officer Darren Wells said.
Industry analyst Saul Ludwig with Cleveland-based KeyBanc Capital Markets asked executives about the projected $75 million to $125 million income drop in the North American Tire division.
''That's enormous,'' Ludwig said. ''That probably explains why the stock is getting mangled.''
Goodyear executives said the drop in North American income will stem from complex reasons, including expected slow sales, higher raw-material costs and what they called ''adverse unabsorbed overhead.''
None of the reasons for the income drop ''speaks to the long-term health of the business,'' Wells said.
Goodyear Tire & Rubber Co. reported earning $72 million, or 30 cents a share, on revenue of nearly $4.4 billion for the third quarter that ended Sept. 30. Net income more than doubled from the $31 million reported a year ago. Revenue was down 15.2 percent from the nearly $5.2 billion for the third quarter of 2008.
''I am pleased to say our operating results were strong in the third quarter,'' said Bob Keegan, chairman and chief executive officer.
Goodyear's third-quarter finances were in line with the company's original operating plan despite more difficult conditions than executives had expected at the start of 2009, Keegan said.
For the first nine months of the year, Goodyear has lost $482 million on sales of nearly $11.9 billion. For the same nine-month period in 2008, Goodyear showed a profit of $253 million on revenue of nearly $15.4 billion.
The North American Tire division had a $2 million profit on sales of nearly $1.9 billion, compared to a loss of $19 million on revenue of $2.2 billion a year ago. The division sold 17.1 million tires in the quarter compared to 18.1 million a year ago.
The company cut about 300 jobs in the third quarter, bringing total job cuts to about 5,800 this year. Goodyear said it has nearly 70,000 employees worldwide.
The company said it introduced 57 new products this year through September, and that its new Fuel Max tires sold 1 million units in North America.
Goodyear announced its latest tire on Wednesday — a 63-inch, 12,000-pound off-road tire for large mining and construction vehicles that will be built in Topeka, Kan.
The new four-year contract with the United Steelworkers will bring Goodyear cost savings of $555 million and give the company more flexibility at its U.S. plants, Goodyear said.
The global economic environment is showing improvement, with Asia leading the recovery, Keegan said. The North American and Latin American markets are stabilizing, he said, while Europe is lagging.
Keegan said he expects Goodyear will show year-over-year growth and improved earnings going into 2010, including the North American Tire division. The expected market trends play to Goodyear's strengths, which include emphasizing premium and mid-tier tires, he said.
''We are on our plan. We are hitting on all cylinders,'' Keegan said.
Jim Mackinnon can be reached at 330-996-3544 or jmackinnon@thebeaconjournal.com.
Goodyear reported its first profitable quarter since 2008 and promptly saw share prices drop the most in 22 years.
The culprit: Much lower income is expected for the rest of this year from Goodyear's key North American Tire division.
Executives on Wednesday said they anticipate, for a number of reasons, that Goodyear's largest division will have between $75 million and $125 million less income in the current quarter compared to the third quarter.
Goodyear's stock closed down $3.28, or 19.6 percent, to $13.46, making it the worst performer Wednesday in the Standard & Poor's 500 Index.
Share prices fell by $4.74 at one point, which sent the price briefly to $12. Shares are up 125.5 percent since Jan. 1 — well up from the year low of $3.51 on March 6 — and are up 56.5 percent from a year ago. The drop sheared $794 million off Goodyear's market capitalization, or value of the company, to $3.25 billion. (Market cap is defined as the stock price times the number of outstanding shares.)
But executives told industry analysts in a conference call that they expect the Akron tire maker will have a stronger financial performance in 2010 because of ongoing efforts to improve profitability combined with an expected global economic recovery.
Including the North American Tire projections, fourth-quarter results are expected to be in line with the company's plans and ''significantly improve'' from a year ago, Chief Financial Officer Darren Wells said.
Industry analyst Saul Ludwig with Cleveland-based KeyBanc Capital Markets asked executives about the projected $75 million to $125 million income drop in the North American Tire division.
''That's enormous,'' Ludwig said. ''That probably explains why the stock is getting mangled.''
Goodyear executives said the drop in North American income will stem from complex reasons, including expected slow sales, higher raw-material costs and what they called ''adverse unabsorbed overhead.''
None of the reasons for the income drop ''speaks to the long-term health of the business,'' Wells said.
Goodyear Tire & Rubber Co. reported earning $72 million, or 30 cents a share, on revenue of nearly $4.4 billion for the third quarter that ended Sept. 30. Net income more than doubled from the $31 million reported a year ago. Revenue was down 15.2 percent from the nearly $5.2 billion for the third quarter of 2008.
''I am pleased to say our operating results were strong in the third quarter,'' said Bob Keegan, chairman and chief executive officer.
Goodyear's third-quarter finances were in line with the company's original operating plan despite more difficult conditions than executives had expected at the start of 2009, Keegan said.
For the first nine months of the year, Goodyear has lost $482 million on sales of nearly $11.9 billion. For the same nine-month period in 2008, Goodyear showed a profit of $253 million on revenue of nearly $15.4 billion.
The North American Tire division had a $2 million profit on sales of nearly $1.9 billion, compared to a loss of $19 million on revenue of $2.2 billion a year ago. The division sold 17.1 million tires in the quarter compared to 18.1 million a year ago.
The company cut about 300 jobs in the third quarter, bringing total job cuts to about 5,800 this year. Goodyear said it has nearly 70,000 employees worldwide.
The company said it introduced 57 new products this year through September, and that its new Fuel Max tires sold 1 million units in North America.
Goodyear announced its latest tire on Wednesday — a 63-inch, 12,000-pound off-road tire for large mining and construction vehicles that will be built in Topeka, Kan.
The new four-year contract with the United Steelworkers will bring Goodyear cost savings of $555 million and give the company more flexibility at its U.S. plants, Goodyear said.
The global economic environment is showing improvement, with Asia leading the recovery, Keegan said. The North American and Latin American markets are stabilizing, he said, while Europe is lagging.
Keegan said he expects Goodyear will show year-over-year growth and improved earnings going into 2010, including the North American Tire division. The expected market trends play to Goodyear's strengths, which include emphasizing premium and mid-tier tires, he said.
''We are on our plan. We are hitting on all cylinders,'' Keegan said.
Jim Mackinnon can be reached at 330-996-3544 or jmackinnon@thebeaconjournal.com.
Comments
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Posted 09:08 AM, 10/29/2009
a combination of a bad day on the stock market -combined with investors focusing on the 09 year's overall losses vs. one quarters little gain.
uniontown, oh
Posted 12:07 PM, 10/29/2009
Good time to buy.
