Looks like Goodyear Tire & Rubber
While the stock has had its ups and downs since this recovery began in early 2003, 2005 ended on a high note. And, well, that high note's a bit off-key now: The company preannounced lower earnings for the fourth quarter, and Thursday's release of the actual report hasn't done much to improve the Street's mood.
Revenue in the fourth quarter rose about 2% on a nearly 1% increase in units sold. Unfortunately, raw-material prices continue to head higher (up 13% this quarter), and that took the air out of the gross and operating margins. In all, operating earnings fell more than 2% -- not exactly what anybody wanted to hear.
Only two of the company's reporting segments produced growth at the segment operating profit level -- North American tires and Asia-Pacific tires. In the case of North America, at least, weak new-car sales from the Ford
Unfortunately, Goodyear has had to contend with the same kinds of cost inflation that seem to have been affecting everyone who relies upon commodity inputs. In the case of Goodyear, they've had to deal with higher prices for commodities like rubber, carbon black, and natural gas -- although the latter appears to be easing off these days.
In short, this is tough stock to get excited about. Margins and returns on capital are pretty meager across the industry (and that applies to rival Cooper Tire & Rubber
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).