KeyBanc Capital Markets Managing Director Saul Ludwig does not paint a pretty picture for replacement tire shipments in 2008.
Ludwig estimates North American industry replacement tire shipments will be down 7% compared to 2007. Through May, replacement shipments are down 5.5%, "but the degree of decline has intensified in the last three months." Also, in the last six weeks, retail tire sales were "extremely weak" based on dealer interviews.
Replacement shipments from Cooper Tire & Rubber Co. will not keep up with the industry, he says. The company's volume will be down 10% this year, and its earnings per share estimate for 2008 has been lowered to 10 cents.
Cooper "still has to demonstrate its ability to deliver better results in what is a tough environment," according to Ludwig.
Goodyear Tire & Rubber Co.'s original equipment and replacement volume will be down 10% for the year, he says. "We are still very constructive on Goodyear's strategy and its outlook for the next few years, even though the intensifying headwinds in North America are a concern."
KeyBanc's rating for Cooper's stock remains "Hold." It also maintains its "Buy" rating for Goodyear.
