Tire industry analyst John Healy, managing director of research for Northcoast Research Holdings LLC, studies anything that will affect the domestic stock prices for which he is responsible.
In the United States, he targets Goodyear Tire & Rubber Co. and Cooper Tire & Rubber Co. Goodyear recently moved its stock to NASDAQ, while Cooper sells its stock on the New York Stock Exchange.
According to Healy, tire pricing is holding despite the expiration of Tariff 421. That doesn't mean they haven't dropped at all, however.
"In order to monitor pricing trends in the consumer replacement tire market, we developed the Northcoast Research Tire Pricing Index (TPI), a proprietary data set comprised of more than 20,000 domestic tire prices," he says. "The TPI is designed to provide us with a better understanding of tire manufacturers’ strategies, as well as competition within the industry."
After peaking the week of Sept. 19, 2012, retail prices trended downward, says Healy, with the aggregate level of prices down approximately 1.6%.
"As expected, the downward pressure on prices has been the most acute in the mid-tier and value segments, which are off 2.4% and 1.4%, respectively. That said, premium tire prices are down 1.2% since mid-September."
Healy says he is encouraged by the recent results of the TPI index, which suggests that manufacturer price concessions on non-Chinese tires since the expiration of Tariff 421 have been modest.
"In short, our research suggests that the industry has remained disciplined from a pricing perspective thus far, which should ease investor concern -- at least in the short-run."
Given the stable pricing, Healy has this to say about Goodyear and Cooper.
Goodyear: "We continue to believe Goodyear’s future results will be driven by gains in 'gross profit per tire' and not unit growth."
Cooper: "We think Cooper is positioned for several years of earnings progress as it continues to bring the right mix of value and technology to the market and be a beneficiary of lower input costs."
