Goodyear Tire (GT
22.30, +1.15, +5.44%) is higher, even though the company lowered its guidance
for the fiscal year.
The tire-maker reported above-consensus second quarter earnings of $0.62 per share on a 4.2% year/year increase in revenue to $3.84 bln, which was just shy of estimates.
Looking ahead, the company expects that its operating income for fiscal year 2018 will be between $1.45 bln and $1.50 bln. This represents a decline from previous guidance for operating income between $1.80 bln and $1.90 bln. The decline was driven by expectations for a $130 mln increase in raw material costs during the second half of the year. In addition, the company expects that operating income will be reduced by $60 mln due to currency headwinds while softening market conditions in China will cost about $70 mln.
Tire unit volume totaled 39.00 mln during the second quarter, up 4.0% year/year. Replacement tire shipments increased 5.0% due to higher industry demand and market share gains in Europe, Middle East, and Africa. Shipments to Original Equipment Manufacturers grew 3.0% due to demand from Asia-Pacific and global commercial shipments.
Segment operating income declined 12.2% to $324 mln due to higher raw material costs, general cost inflation, and lower price/mix. These factors were partially offset by benefits from cost savings initiatives and higher sales volume.
Looking at the regional breakdown, unit sales in the Americas grew 1.2% to 17.10 mln while revenue declined 0.5% to $2.02 bln. Segment operating margin contracted to 7.6% from 10.7% one year ago. Replacement tire shipments rose 1.5% due to strength in the United States. OEM volume increased 2.0% due to growth in commercial and consumer segments. Operating income declined 29.0% to $154 mln due to reduced price/mix and increased raw material costs.
Unit sales in Europe, Middle East, and Africa grew 9.2% to 14.20 mln while revenue increased 13.1% to $1.26 bln. Segment operating margin improved to 7.9% from 7.2% one year ago. Replacement tire shipments grew 13.0% due to strength in the consumer business. OEM volume increased 1.0%. Operating income improved 25.0% to $100 mln due to higher sales volume and favorable price/mix. These factors were partially offset by higher raw material costs.
Unit sales in Asia Pacific grew 2.7% to 7.50 mln while revenue grew 3.7% to $563 mln. Segment operating margin declined to 12.4% from 13.1%. Replacement tire shipments declined 3.0% due to softening conditions in China. OEM volume grew 9.0%. Segment operating income declined 1.4% to $70 mln due to lower price/mix, which outweighed benefits from higher volume.
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