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Analyst takes a pre-3Q look at: Goodyear

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Goodyear Tire & Rubber Co.'s strategic focus on maximizing the value associated with its flagship brand appears to be working.

According to John Healy, managing director of research for Northcoast Research Holdings LLC, Goodyear is committed to fulfilling the needs of consumers and dealers that are looking for high-value-added tires.

"In our opinion, Goodyear remains focused on target segments of the tire industry, and in doing so, has been very successful in monetizing the products it brings to market. As we look out to next year, we are modeling a volume increase across all categories -- especially snow tires in Europe."

Increased plant operating rates and a modestly favorable "price/mix-to-raws spread" should allow Goodyear to achieve its 2013 share on investment goals, says Healy, who maintains a "Buy" rating on Goodyear's stock, especially given its low valuation.

There are a number of other plusses and minuses to look at prior to the announcement of Goodyear's third-quarter financial results on Oct. 26, 2012.

Plus: new capacity in China and Chile.

Minus: start-up costs in China on the initial production of truck tires.

Plus: Goodyear 's expected resolution of the Amiens, France, labor issue.

Plus: recent declines in raw material prices.

Wild card: Goodyear's ability to rekindle dealer enthusiasm and avoid further market share degradation.

Healy says based on recent conversations with numerous tire wholesalers and installers, "it appears that demand continues to be less than ideal, as consumers remain extremely frugal, and in some ways, still very reluctant to pony up money for new tires.

"That said, wholesalers and installers appear to be seeing a very modest pick-up in sell-through at retail relative to the trends witnessed earlier in the year as many consumers can no longer delay the replacement cycle."

Goodyear posted net income of $103 million on net sales of nearly $5.2 billion for the second quarter ended June 30, 2012. For more on Goodyear's 2Q financial results, click here.

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