Consumer Tires Retail Suppliers Wholesale Distribution

Demand and tariffs should benefit Goodyear

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Consumer demand for passenger and light truck tires was up in June compared to June 2014. So says Nick Mitchell, senior vice president of research for Northcoast Research Holdings LLC.

According to the proprietary Northcoast Research Tire Demand Index, demand also was much higher in June than in May. (The index is constructed from the results of a monthly survey of approximately 100 tire dealers located across the country.)

"Needless to say, we were encouraged by the fact that the index remained in positive territory after hovering around the break-even point for the past four months," says Mitchell. "In our opinion, the performance over the past four months added support to the dealers’ thesis that February’s softness was largely due to the harsh winter weather across the Midwest and Northeast, which negatively impacted traffic levels and unit volumes across the installers in these regions of the country during the period."

Here's how Mitchell, also author of Modern Tire Dealer’s monthly "Your Marketplace" column, describes each tier's brand share performance in June.

Tier 1: "the strongest portion of the market."

Tier II: "the main share donor in June, with some benefit likely accruing from the effects of an improving macroeconomic backdrop making it easier for tire retailers to up-sell customers."

Tier III: "at the bottom of the podium for the 10th straight month, likely due to the latest AD/CVD actions."

Given the positive findings, Mitchell believes the domestic replacement market is in the midst of a volume recovery cycle, "which should clearly benefit tire manufacturers like Goodyear and Cooper for the foreseeable future and provide a tailwind to installers, including Monro Muffler."

Northcoast Research reiterates its "Buy" recommendation for Goodyear's stock.

"We continue to believe the shares are undervalued, and remain believers in the strategic plan," says Mitchell. "The higher AD (anti-dumping) and CVD (countervailing) penalties on tires imported from China should provide a better environment to leverage the launch of the new Kelly Edge product."

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