What happened
Goodyear Tire & Rubber (GT 0.85%) has been in the fast lane for most of 2023, but nothing went right for the company in the just-completed second quarter. Shares of Goodyear traded down as much as 22% on Thursday after the company posted an unexpected quarterly loss.
So what
Goodyear lost $0.34 per share on an adjusted basis in the second quarter on revenue of $4.87 billion, missing analyst expectations for a $0.16-per-share profit on sales of $5.18 billion. The company blamed weak demand in the Americas and Europe, as well as a slowdown in freight miles that led to a weakened commercial tire replacement schedule.
In the U.S. alone, Goodyear cited "softer industry volume, the ongoing effects of inflation, and the storm-related interruption of operations" at one plant for the miss. Americas consumer replacement volume declined 13% year over year, or 7% without the impact of the storm interruptions. Goodyear noted the storm-adjusted figure is actually better than the industry as a whole, which was down 9%.
Commercial truck volumes declined by 15%, relative to an industrywide decline of 19%.
Now what
The automotive industry has experienced wild swings in recent years, and the market for tires and other auto parts has responded accordingly. Couple those pressures with economic uncertainty that has eaten into trucking volumes, and it is easy to see where Goodyear stumbled relative to expectations.
The company said that third-quarter volumes should be helped by improving comparisons relative to the previous environment, where demand was relatively strong, and materials costs were lower. This current period should be the first this year where the net impact of price, raw material costs, and inflation will be positive. But volumes are likely to remain sluggish for at least the next few quarters.
Shares of Goodyear were up more than 50% for the year heading into earnings season. After the latest report, it will likely be difficult for the stock to reaccelerate anytime soon.
