Goodyear Tire & Rubber Company ( NASDAQ: GT ) shares drove lower in Monday’s extended session after posting a mixed earnings result that reflected declining volumes and continued inflationary pressures.
For the reported quarter, the Akron-based company posted $1.07 in adjusted EPS alongside $5.31B in revenue. Analysts had anticipated $0.55 and $5.34B, respectively. The company highlighted a “record price/mix of $742M” that helped outpace higher raw material costs and carry profits above expectations.
CEO Richard Kramer said in a letter to investors that net sales grew 8%, but would have marked a 15% jump when adjusting for foreign exchange. Pricing moves, which have become a staple of the tire industry, rose 16% to drive the gains and offset still-rising input costs. However, he added that tire volumes declined 3% from the prior year quarter as concerns on replacement industry volume arise. Kramer said he anticipates the operating environment will “continue to be challenging” into 2023 as new issues crop up.
“During the third quarter, we faced many ongoing challenges, including persistent inflation,” he stated. “At the same time, new challenges emerged, including a less certain outlook in Europe and the effects of a stronger U.S. dollar.”
Heading into the fourth quarter, management expects increasing energy prices to continue to rise, with overall cost-inflation anticipated to peak in the quarter. Raw material costs are also expected to increase $500M during the quarter.
“Some raw material costs originally expected to occur in the third quarter will now be realized in the fourth quarter, given lower-than-expected third quarter volumes,” the earnings release stated.
Further, the tire manufacturer expects year-over-year cost increases of $300M to $400M in the first half of 2023, with the bulk of these cost increases to come in Q1. Also, the company now projects to use $300M to $500M in working capital for the fourth quarter up from a prior $300M expectation.
Shares of Goodyear Tire ( GT ) skidded 12.6% lower shortly after the print. An earnings call is set to take place on Tuesday at 8AM ET .
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Goodyear Tire stock skids as cost inflation, currency concerns impact earnings