DETROIT: Goodyear Tire & Rubber Co reported a profit more than four times as high as Wall Street had expected on strength in its home market of North America, and its shares jumped to a 19-month high.
Excluding one-time items, the Akron, Ohio-based tire maker earned 51 cents a share in the first quarter, easily topping analysts' average estimate of 12 cents, according to Thomson Reuters
Goodyear's first-quarter sales of $5.4 billion were up 27 percent from a year earlier. Sales set quarterly records for each of the company's four global regions, including a 30-percent increase in its North American business to $2.3 billion.
Sales in its Europe region were up 28 percent to $2 billion.
Goodyear's shares rose as high as $18.68 per share, up 15.3 percent on the day and their highest level since September 2009. Goodyear's trading volume with two hours left before market close was already three times the normal daily average.
Earnings of two other major automotive suppliers, Lear Corp and American Axle and Manufacturing Holding Inc, also blew past Wall Street's profit expectations on Friday, a sign that the auto industry recovery is gaining momentum globally, and particularly in North America.
"Nowhere is (Goodyear's) momentum clearer than in our North American business," said Goodyear Chief Executive Officer Richard Kramer on a conference call with analysts.
"North American profitability is essential to reaching our 2013 target" of $1.6 billion in operating income in 2013, he said.
Operating income in 2010 was $917 million.
RAW MATERIALS COST RISING
Goodyear was able to offset higher raw materials costs, including natural rubber and carbon black, in the first quarter by selling its products for higher prices, such as a 15-percent increase in price per tire, Kramer said.
But the company will face stiffer challenges in meeting raw materials costs that will show "unprecedented" price spikes in the second half of the year, Chief Financial Officer Darren Wells said on the call.
Goodyear expects a 25- to 30-percent rise in raw material costs for the rest of 2011.
Wells said raw materials costs will produce more than $500 million in "headwinds" in the third quarter and again in the fourth quarter.
Kramer said that the company will over time make up for the lofty price spikes for natural rubber and carbon black and synthetic rubber later this year.
Goodyear said it was not greatly hurt by the earthquake in Japan. It has a plant that makes heavy machinery tires in southern Japan that was not damaged.
The main impact to Goodyear of the Japan crisis was a rise in commodity prices that hit every company with heavy reliance on those costs, Wells said.
Kramer also cautioned about pressure on company and overall auto industry financial performance later in the year.
"While we expect a strong year, we do not expect to see the same level of industry growth that we saw in the first quarter," Kramer told analysts.
Sales in the industry, including Goodyear's, were boosted in the first quarter, he said, as dealers made large purchases of tires ahead of announced price increases and as they perceived tightness of industry supply.
Wells said that Goodyear expects it can offset second-quarter raw materials price gains within that quarter.
The company's net income of $103 million, or 42 cents per share, compares with a year-earlier net loss of $47 million, or 19 cents per share.
Goodyear shares were up 12.8 percent at $18.28 in afternoon trading on the New York Stock Exchange.
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