Goodyear on Friday reported a profitable third quarter, although earnings and revenue were substantially lower than a year ago as tire sales slowed.
The Akron tire maker’s results failed to meet analyst expectations and Goodyear shares fell. Shares dropped $1.27, or 10.3 percent, to $11.03 on heavy trading volume. A bit more than 15 million shares changed hands; Goodyear’s recent average was 4.6 million shares daily.
Even as overall revenue and income fell from 2011 levels, the Akron tire maker said that its critical North American Tire segment had a strong financial performance and is on track to exceed profitability goals of $450 million a full year ahead of schedule.
The company also reaffirmed 2013 corporate earnings targets, saying it expects to have $1.6 billion in operating income for the year. To reach that goal, Goodyear will rely more on North American Tire results and less on its other global operations in addition to taking other measures, Richard Kramer, chairman and chief executive officer, told industry analysts.
Goodyear Tire & Rubber Co. earned $110 million, or 41 cents per share, on revenue of $5.3 billion. Net income was down 31.7 percent from $161 million, or 60 cents per share, for the third quarter of 2011. Revenue was down 13.2 percent from a quarterly record $6.1 billion a year ago.
Adjusted earnings were 53 cents per share; analysts surveyed by Bloomberg News expected Goodyear to show 59 cents.
The company said it expects tire sales in the final quarter of the year to be down 3 percent to 5 percent from a year ago. For the full year in North America, consumer tire sales likely will be down 2 to 3 percent and original equipment tire sales will be up between 8 and 10 percent. Commercial replacement tire sales will be down 6 to 8 percent, while original equipment commercial tire sales will also be up 6 percent to 8 percent.
Goodyear continues to execute under its strategic plan, Kramer said in a conference call with analysts.
“We’re not running our business for one good quarter or one good year,” he said.
North American Tire delivered an outstanding quarter and will meet or exceed internal goals by a full year, he said.
North American Tire had third-quarter operating income of $130 million on sales of $2.4 billion, compared to revenue of $78 million on sales of nearly $2.6 billion for the third quarter of 2011. Tire sales totaled 15.6 million, down from 16.6 million a year ago.
For the first nine months of 2012, North American Tire had income of $398 million on revenue of $7.3 billion compared to income of $255 million on revenue of nearly $7.3 billion for the same period in 2011. Tire sales were 46.8 million compared to 49.4 million for the same nine months in 2011.
Goodyear cut tire production by about 6 million units in the third quarter, largely because of slow sales. The company said it expects to further reduce tire production in the current fourth quarter largely because of what it said are “recessionary economic conditions in Europe.”
Goodyear plans to cut about 900 jobs globally this year; about 600 have been released as of Sept. 30 from unspecified locations, the company said in its quarterly filing with the Securities and Exchange Commission. The job cuts are not new announcements from the company, which has about 71,000 employees worldwide. Goodyear took a $21 million charge in the 2012 third quarter related to severance costs.
The company in 2011 reported hundreds of job cuts through closing tire plants in Union City, Tenn., France and relocating a factory in China.
Goodyear is on track to exceed its three-year, $1 billion cost-reduction plan, executives said.
While tire sales were down, revenue per tire was up, Goodyear said.
“We achieved solid segment operating income in the third quarter, driven by our performance in North America,” Kramer said in a statement. “While we were impacted by the macroeconomic challenges we face in Europe, we continue to see the benefits of our actions to sustain profit margins in a weak volume environment.”
To reach its $1.6 billion income target next year, Goodyear likely will need to see tire sales increase, said Darren Wells, executive vice president and chief financial officer. The company will be able to make other adjustments to hit the target if volume does not pick up, he said.
Wells noted that annual tire sales are about 240 million to 241 million in North America. “That market’s been as high as 257 million units, as we look at it. So there is an opportunity for a tailwind there,” he said.
The expiration of tire tariffs on Chinese made consumer tires sold in the United States had little impact on Goodyear, Kramer said. Goodyear has largely exited the business of making the kind of low-profit, private label tires that compete against the Chinese imports, he said.
Jim Mackinnon can be reached at 330-996-3544 or firstname.lastname@example.org.