CHICAGO – Goodyear Tire & Rubber Co. (GT), the largest U.S. tiremaker, Friday said it would report a third-quarter profit, reversing a year-earlier loss, on higher prices for its products and stronger sales.
The company, whose shares rose 11 percent Friday morning, lost more than $2 billion in 2002 and 2003 as marketing missteps and soured relationships with dealers hurt business. Goodyear's troubled North American unit in the second quarter made money for the first time in nearly two years.
Akron, Ohio-based Goodyear said third-quarter profit could be between 19 and 21 cents a share, compared with a loss of 68 cents per share a year earlier.
The company, which last year began pushing ahead with a turnaround plan, said it expects sales of about $4.7 billion, up from $3.9 billion in the third quarter of 2003.
Analysts on average expect Goodyear to earn 19 cents a share in the quarter, with sales of $4.52 billion.
"It's a step in the positive direction, but there are longer-term concerns about the company and its cost structure," said Fitch Ratings credit analyst Chris Struve.
Goodyear faces pressures from the cost of rubber and oil-based products that affect all tire makers, and from union pension costs seen in most older U.S. manufacturers, he said.
Manufacturers in general are having difficulty in the short and medium term with rising commodity costs and are having a hard time offsetting those increases through pricing to retail customers or automakers, Struve said.
Third-quarter results will include previously announced charges mostly on cost cuts in Goodyear's non-tire businesses, largely offset by favorable tax adjustments on the settlement of prior-year tax liabilities, Goodyear said.
Goodyear also said it had discovered errors which would be restated from its 2003 financial statements. The errors include a misclassification of deferred income tax assets and liabilities by about $360 million, it said. The errors had no effect on cash flow or net income and the report changes are not expected to have an impact financial covenants, it said.
The most important thing is that it does not affect the covenants, followed by cash flow and then income, Struve said.
Goodyear has made significant operating improvements across the board and "we are on the right track to continue our turnaround," Chairman and Chief Executive Robert Keegan said in a statement.
The company has been gradually reducing staff ranks to cut expenses and has about 85,000 employees worldwide.
Goodyear said it expects to report the third-quarter results by Nov. 9, including detailed information on the restatement. It will file an amended 2003 annual report and amended quarterly reports for the first and second quarters of 2004 as quickly as possible, Goodyear said.
Goodyear shares were up $1.07, or 10.5 percent, at $11.30 on the New York Stock Exchange (search) Friday morning.