Worldwide tire production suffered a significant setback amid the COVID-19 pandemic owing to an acute labor shortage. Also, Russia-Ukraine-war-induced logistic disruptions continue to hinder the tire industry’s productivity. However, as pandemic-related restrictions ease, manufacturing units are ramping up production. So, a rebound appears to be in the cards. According to the U.S. Tire Manufacturers Association (USTMA), U.S. tire shipments are predicted to reach 340.20 million units in 2022.
In addition, tire prices are slated to rise by 30% in 2022, which bodes well for tire makers. Furthermore, with stable demand for tires in commercial and consumer markets, popular frontline tire-making companies are set to generate solid sales. According to MarkNtel Advisors, the global tire market is estimated to rise at a CAGR of around 3.9% from 2021 - 2026.
Given this backdrop, we think fundamentally sound tire stocks Bridgestone Corporation (BRDCY), Continental Aktiengesellschaft (CTTAY), and The Goodyear Tire & Rubber Company (GT) could be solid additions to one’s portfolio for the long haul.
Bridgestone Corporation (BRDCY)
Headquartered in Tokyo, Japan, BRDCY is a global leader in tires and rubber. The company and its subsidiaries manufacture and sell tires and rubber products. It operates through two segments: Tires and Diversified Products.
On Feb. 18, 2022, BRDCY and ENEOS Corporation formed a joint research and development project to develop a recycling business that will convert used tires to raw materials, enabling a more sustainable society. Shuichi Ishibashi, BRDCY’s Global CEO and Representative Executive Officer said, “This project represents a significant step forward in our quest to increase resource circulation and promote carbon neutrality in the tire and rubber industry.”
BRDCY’s revenue increased 9.8% year-over-year to ¥928.60 billion ($7.71 billion). And its adjusted operating profit was ¥105.50 billion ($880 million), up 1% year-over-year.
Analysts expect BRDCY’s revenue to increase 10.2% year-over-year to $8.05 billion for the period ended Sept. 30, 2022. Its EPS is estimated to grow 43.8% per annum for the next five years. The stock closed yesterday’s session at $19.17.
BRDCY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
BRDCY has an A grade for Quality and a B grade for Value and Stability. Within the Auto Parts industry, it is ranked #6 of 69 stocks. Click here to see the additional POWR Ratings for Growth, Momentum, and Sentiment for BRDCY.
Continental Aktiengesellschaft (CTTAY)
Headquartered in Hanover, Germany, CTTAY offers products, systems, and services worldwide. Its segments are Autonomous Mobility and Safety business; Vehicle Networking and Information business; Tires business; ContiTech business; and Powertrain Technologies business.
On March 15, 2022, CTTAY launched dimensions of the AllSeasonContact tire for the first time with a rolling resistance class A rating. Andreas Schlenke, CTTAY’s tire developer, said, “We’re proud to be one of the first tire manufacturers to successfully optimize the rolling resistance of an all-season tire significantly without any loss of safety.”
CTTAY’s sales came in at €33.77 billion ($37.08 billion) for the year ended Dec. 31, 2021, up 6% year-over-year. Its net income came in at €1.46 billion ($1.60 billion), compared to a €961.90 million ($1.06 billion) loss in the year-ago period. Also, its EPS came in at €7.28, compared to a €4.81 loss per share in the previous period.
CTTAY’s revenue is expected to increase 13% to $42.99 billion in its fiscal year 2022. Its EPS is expected to grow 43% per annum for the next five years. Also, it surpassed the consensus EPS estimates in three of the trailing four quarters. CTTAY closed yesterday’s session at $7.32.
CTTAY has an overall B grade, which equates to a Buy in our POWR Ratings system. It has an A grade for Value and a B grade for Quality. It is ranked #20 in the Auto Parts industry. Click here to see the additional ratings for CTTAY (Growth, Momentum, and Sentiment).
The Goodyear Tire & Rubber Company (GT)
GT and its subsidiaries develop, manufacture, distribute, and sell tires and related products and services worldwide. It operates approximately 1,000 retail outlets, which offer products for retail sale, and provides repair and other services. GT is headquartered in Akron, Ohio.
On March 8, 2022, GT announced that it would soon introduce its fuel-efficient Fuel Max RSA and the “Electric Drive Ready” Endurance RSA ULT to meet growing demand trends within the last-mile delivery segment. Jessica Julian, GT’s product marketing manager, said, “The launch of the fuel-saving Fuel Max RSA and EV-ready Endurance RSA underscores Goodyear’s commitment to offering specialized tires for every application so companies can find the right solution for their fleets.”
For the fiscal fourth quarter, ended Dec. 31, 2021, GT’s net sales came in at $5.05 billion, up 38.2% year-over-year. Its net income came in at $553 million, up 777.8% year-over-year, while its adjusted EPS came in at $0.57, up 29.5% year-over-year.
Analysts expect GT’s revenue to increase 17.1% to $20.47 billion in 2022. Its EPS is estimated to increase 34.7% to $2.99 in 2023. It surpassed the EPS estimates in each of the trailing four quarters. The stock closed yesterday’s trading session at $13.98.
It is no surprise that GT has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has an A grade for Value and a B grade for Growth and Quality.
GT is ranked #16 in the Auto Parts industry. We have also rated the stock for Momentum, Stability, and Sentiment. Click here to get additional GT ratings.
BRDCY shares were trading at $19.02 per share on Tuesday afternoon, down $0.15 (-0.78%). Year-to-date, BRDCY has declined -11.33%, versus a -5.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
3 Tire Stocks to Buy for the Long Haul: Bridgestone, Continental, Goodyear StockNews.com
