April 28, 2017 / 11:49 AM / a year ago

Goodyear Tire profit beats estimates on price hikes

(Reuters) - Goodyear Tire & Rubber Co (GT.O) reported quarterly profit that beat estimates, as the company sold tires at higher prices while keeping a lid on its costs.

FILE PHOTO: The "Spirit of Innovation", the last of Goodyear's GZ-20 model blimps, is decommissioned in Carson, California, U.S. March 14, 2017. REUTERS/Mike Blake/File Photo

The company’s shares rose as much as 3.6 percent to $36.74 on Friday.

The No.1 US tire maker also reaffirmed its outlook for segment operating income of $2 billion in 2017 and $3 billion by 2020.

The Akron, Ohio-based company has hiked tire prices twice this year, helping it partly offset higher raw material costs in the first quarter.

Raw material costs, that have risen, are expected to be “a significant year-over-year headwind in 2017,” Chief Executive Richard Kramer said in a statement.

Pick-up in orders for heavy-duty trucks, whose production had fallen in the United States due to a supply glut, is likely to help the tire maker’s sales in 2017.

“We feel very good about the performance of commercial truck during the quarter and its potential in the second half of the year,” Chief Financial Officer Laura Thompson said on the earnings call.

Preliminary U.S. heavy-duty truck orders rose 41 percent last month, boosted by truck firms’ return to buying as they see freight volumes rising after a tough environment in 2016, according to industry forecaster FTR.

Global demand for truck and so-called specialty tires - for mining and agriculture - will pick up in 2017, according to rival Michelin (MICP.PA).

    However, Goodyear cut its forecast for full-year tire unit sales to “about flat” from 1 percent increase compared with 2016.

    The company, which also makes tires for aircraft and NASCAR racing cars, said its tire volumes fell 4 percent in the first quarter ended March 31.

    Goodyear’s shipments in the Americas region, its biggest market, declined 4.4 percent due to lower U.S. auto production during the quarter ended March 31.

    Net income fell to $166 million, or 65 cents per share, in the quarter, from $184 million, or 68 cents per share, a year earlier.

    On an adjusted basis, the company earned 74 cents per share, beating estimates of 63 cents, according to Thomson Reuters I/B/E/S.

    Goodyear’s selling, administrative and general expense fell 5.9 percent to $579 million.

    Revenue rose marginally to $3.70 billion.

    Analysts had expected revenue of $3.78 billion, according to Thomson Reuters I/B/E/S.

    Up to Thursday’s close, shares of the company had risen 14.8 percent this year.

    Reporting by Arunima Banerjee in Bengaluru; Editing by Arun Koyyur

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