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June 17, 2014

Industry analyst says tire demand is strong

Tire prices rose in May, according to research by Northcoast Research Holdings LLC.

Based on its tire pricing index, the company says the average price of a replacement light vehicle tire in rose 0.3% on a sequential basis.That breaks down as follows:

* passenger, $125.46 (the average price of the most popular passenger tires was also up 0.3% to $119.60);

* light truck, $164.70 (up 0.8%).

"From a category perspective, the average price of a value tire was unchanged during May, while the average price for a premium tire was up 0.5% and the cost of the average mid-tier tire was up 0.3%," says Nick Mitchell, senior vice president of research.

"It is also worth noting that our contacts in the channel cited that demand trends for replacement tires continued to be strong in May and early June. In fact, the installer community remains optimistic that demand will be solid into the summer season as many of the dealers continue to see an uptick in volumes."

The results in May reinforce Mitchell's belief that pricing trends are slowly stabilizing at the manufacturing level across Tier 1 and Tier 2 brands.

"Additionally, we were pleased to see stabilization in prices in the Tier 3.... category, especially following the sharp slide in natural rubber prices at the beginning of April, resulting in additional price concessions from Chinese importers," says Mitchell.

Based in part on the results, Northcoast Rearch reiterated its "Buy" ratings on the shares of Cooper Tire & Rubber Co. and Goodyear Tire & Rubber Co. The firm remains "Neutral" on share of Monro Muffler Brake Inc.

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