Goodyear tops 4Q; Europe weighs on outlook
- Article by: THOMAS J. SHEERAN
- Associated Press
- February 12, 2013 - 9:25 AM
CLEVELAND - Goodyear easily topped Wall Street expectations for the fourth quarter, but shares slid Tuesday with Europe dragging down the tire maker's outlook for 2013.
The Akron company cut its full-year outlook for 2013 segment operating income from $1.6 billion, to between $1.4 billion and $1.5 billion.
The company broke even for the quarter, compared with net income of $18 million, or 7 cents per share, during the same period last year.
Revenue was $5 billion, down from $5.7 billion last year as a sluggish European economy led to a 16 percent drop in sales for the region.
Excluding charges, Goodyear earned 39 cents per share. Analysts surveyed by FactSet expected fourth-quarter earnings of 20 cents per share, excluding charges, on $5.34 billion in revenue.
Shares of Goodyear Tire & Rubber Co. slipped more than 4 percent, or 66 cents, to $13.25 in early trading.
For the year, Goodyear earned $183 million, or 74 cents per share, on revenue of $21 billion, down from 2011 net income of $321 million, or $1.26 per share, on revenue of $22.8 million.
The company, in a move similar to its strategy in North America, said it will cut about 6 million tire units of high-cost capacity in Europe. The measure should result in about $75 million in annual profit improvement, Goodyear said.
Over the next three years, Goodyear's Europe-Middle East-Africa unit will look to shore up its long-term competitive position in the region by expanding in emerging markets, including eastern Europe.
In the October-December quarter, Goodyear sold 15 percent fewer tires in the region, with replacement tire shipments down 17 percent.
Chairman and CEO Richard Kramer made his case for a European turnaround in a conference call with analysts.
"The successful execution of our transformation in North America is proof positive that we know how to do this," Kramer said.
While there has been some recent stabilizing of the economy in Europe, "We believe there has yet to be a comprehensive and lasting solution to the euro crisis," Kramer said. "The resulting slow economic growth will continue to dampen consumer demand."
In its core North American market, segment operating income was up $95 million to $116 million, a fourth-quarter record, with an emphasis on high-end tires helping offset a 5 percent drop in the number of tires sold.
North American results were aided by lower raw material costs and savings from the shutdown of a high-cost Union City, Tenn., plant.
"We feel very positive about the progress made in our North American, Latin American and Asia Pacific businesses in 2012 and are confident in our ability to continue delivering improved profitability," Kramer said.
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