Tire stocks surge upwards thanks to pricing, cost factors, says Ludwig
"Tire stocks have their best start of any year I can remember," says tire industry analyst Saul Ludwig in the June installment of the "Ludwig Report" in Modern Tire Dealer magazine.
Looking at the stocks through mid-May 2007, Ludwig reports, "Goodyear is up 58%, Cooper is up 67%, Continental is up 18%, and Michelin is up 27% while the S&P 500 is up only 6%."
"Why the surge, especially as gasoline tops the $3 a gallon level? In my opinion," Ludwig says, "a good chunk of high cost capacity has been eliminated, raw material costs have stabilized (albeit at a high level) and manufacturers' price hikes have held.
"That's the right combination for better profits, and higher profits often lead to higher stock prices."
Ludwig is a managing director with KeyBanc Capital Markets Inc. based in Cleveland, Ohio. Look for the full "Ludwig Report" in the June issue of Modern Tire Dealer magazine.