Goodyear Falls Most in Eight Months as Quarterly Sales Miss

  • Unfavorable currency rates, Venezuela change hurt revenue
  • U.S. premium-tire supply is challenge amid demand, CEO says

Goodyear Tire & Rubber Co. plunged the most in eight months after the company’s first-quarter sales missed analysts’ estimates as foreign currency rates and the loss of revenue from its Venezuela operations overshadowed U.S. demand for its premium tires.

The shares fell 9.1 percent to $29.80 at 12:33 p.m. New York time after tumbling as much as 10 percent, the biggest intraday drop since August.

Quarterly sales slid to $3.69 billion from $4.02 billion a year earlier, trailing the $3.92 billion average of five estimates compiled by Bloomberg. Goodyear said in a statement Wednesday that the drop was mostly due to a $141 million hit from currency translations and a $94 million impact from no longer including results from operations in Venezuela, which has struggled with political and economic volatility. Operating profit for its three regional units climbed 8 percent to $419 million as sales of higher-priced tires boosted margins, the company said.

Goodyear is straining to meet U.S. demand for vehicles with higher-margin tires as it waits for additional capacity to become available from its Mexico factory, which is about a year away, Chief Executive Officer Richard Kramer told analysts on a conference call. North America is the Akron, Ohio-based company’s biggest region by revenue, accounting for about 45 percent of total sales.

“Customers want more premium Goodyear-branded products, and increasing our supply is both our biggest challenge and our greatest opportunity,” he said.

The operating profit margin for the Americas region was 13.3 percent in the quarter, the first time Goodyear reported results for the combined North American and South American regions. The comparable margin for a year earlier was 11.1 percent, the company said.

Goodyear “encouragingly reported better-than-expected margin in the newly formed Americas group (combines North and South America), for which the sustainability of margin seems the crux of the bear thesis of many investors," Ryan Brinkman, an analyst at JPMorgan Chase & Co. wrote in a note before the market opened.

Brinkman, who rates the stock overweight, said Goodyear’s reaffirming of its full-year forecast and the stronger Americas margin should “help limit what we expect may be a modestly negative reaction in the shares.”

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