Why Goodyear Tire Shares Were Burning Rubber
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Goodyear Tire & Rubber were zooming ahead today, gaining as much as 15% after second-quarter profits surged higher.
So what: Adjusted earnings per share for the tire maker more than doubled to $0.76 in the quarter from $0.33 a year ago, soaring past estimates of $0.48. Revenue actually fell 5% to $4.89 billion, but that still edged out estimates of $4.88 billion. Latin America sales were particularly strong, improving 6% as operating income in the region jumped 42%. Goodyear also overcame a 10% drop in North American revenue by focusing on higher-end tire sales, and said full-year operating income should be at the top end of its previously stated range of $1.4 billion to $1.5 billion.
Now what: The drop in revenue may be discouraging, but improving auto sales should help Goodyear's revenue stabilize. CEO Richard Kramer was optimistic about the current quarter, saying he expects a 3% to 5% volume increase on "continued improvement in emerging markets and slow but steady recovery in mature markets." With the stock's 2013 P/E under 9, there should be plenty of upside potential if management can keep its promises. I'd expect shares to move higher.
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The article Why Goodyear Tire Shares Were Burning Rubber originally appeared on Fool.com.
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