$13.66
-0.39 (-2.78%)
The Goodyear Tire & Rubber Company (GT)
CAPS Rating:
A manufacturer of tires and rubber products. The Company also manufactures and markets several lines of power transmission belts, hoses and other rubber products and rubber-related chemicals for various applications.
RSS Headlines
Fool UK
Recs
I am of the opinion that there are a multitude of forces that are about to come together in a 'perfect storm' (of underperformance) for GT.
1. Rubber is already up 14% this year and we still have 3 quarters to go. The increase in rubber prices from 2006 => 2007 was about 3.6% and shaved about 1% off Gross Margin for the year. Looking at the 14% rise so far 3.6% seems tame. I can't imagine that the increase this year is going to do less damage....
2. Oil, as we all know, has been skyrocketing. This is a minor input for GT compared to rubber but still affects a large portion of their product line.
1a,2a. No hedging program (that I could find) to handle these commodity risks.
3. Scary scary US auto market and general economy. Auto sales are predicted to be stagnant at best for the next two years. On top of that the horrible economy means people will defer buying replacement tires or trade down to the cheaper alternatives.
4. ASIAN INFLATION!!!! Inflation is finally catching up with China's breakneck growth (as well as the other Asian economies). Inevitably this is going to affect the cheap production GT has overseas.
The one bright spot is that US sales are no longer a majority of revenue. If GT international demand can keep up they might stave off a cratering in the US. I am still bearish for the medium-long term though.