Goodyear Tire & Rubber, the largest U.S. tire maker, posted a quarterly profit Tuesday, supported by a gain on the sale of its engineered products business and a focus on sales of more expensive branded tires.
Goodyear , whose shares soared more than 7 percent in morning New York Stock Exchange trading, said operating income rose in all five of its tire-making regions and the company remains on track to reach its targets of a four-year restructuring plan.
"On balance, third quarter seemed notably stronger than expected," J.P. Morgan analyst Himanshu Patel said in a note.
Goodyear reported a net profit of $668 million, or $2.75 per share, for the third quarter, compared with a net loss of $48 million, or 27 cents per share, a year earlier, when it took restructuring and other charges.
The company reported an after-tax gain of $517 million, or $2.12 per share, from the engineered products unit sale and a small gain on another asset sale.
Excluding one-time items, Goodyear reported earnings of 70 cents per share from continuing operations, while analysts on average expected it to report earnings of 53 cents, according to Reuters Estimates.
Sales rose 3.1 percent to $5.06 billion from continuing operations, while analysts expected $5.16 billion.
North American Tire, its largest unit, reported a 6 percent drop in sales, but operating profit more than tripled to $66 million, the highest level in six years.
A reduced focus on lower profit tires, and weaker markets for sales to automakers and the replacement market, cut into sales in North America. However, higher prices and higher percentage sales of more expensive tires drove earnings.
Revenue and profits rose in all the other regions.
Goodyear is in a restructuring set to run through 2009 that has included some plant closings, asset sales and a focus on obtaining more raw materials and increasing production in lower-cost regions.
Raw materials make up about one-third of the cost of producing a tire, but Goodyear has been able to raise prices so far to more than make up for the increase in cost for materials such as natural rubber, carbon black, fabric and steel cord.
The tire maker did not disclose any impact from a North American strike the last three months of 2006. It had no strike impact in the year ago quarter.
Goodyear and the United Steelworkers settled the strike last December with a contract that permitted the adoption of a Voluntary Employees' Beneficiary Association, or VEBA, that shifts retiree health-care liabilities away from the company.
The company said it now expects VEBA to be established in the first half of 2008. It had expected the VEBA to go through a required court-approval process by the end of 2007.
Goodyear shares were up $1.93, or 7.12 percent, at $29.05.
Through Monday, the shares had risen 29 percent in 2007, while the Dow Jones U.S. automobiles and parts index is up about 16 percent.