As we've said before, we're not looking for the companies that are immune to rising oil prices, like some lesser publications might be, we want the companies that are getting battered, but could be poised to turn around. Not sure if there is a good opportunity here, but this is the kind of stuff we're looking for:
DENVER (AP) -- Surging oil prices aren't just hitting drivers at the fuel pump. They're affecting prices at the tire shop, too.
Four major tire makers have announced price increases for this fall, following similar announcements by most manufacturers earlier this year. Goodyear Tire & Rubber Co. has announced three price hikes this year alone as oil nears $70 a barrel, and with prices for steel and natural rubber also rising.
The latest Goodyear hike, a 5 percent to 8 percent increase depending on the tire model, took effect Thursday. So a tire going for $100 could potentially go for $108. The Ohio-based company also increased prices in February and June.
"If you look at it from a tire manufacturer's perspective, an oil price increase is a triple whammy for us," said Jim Davis, a spokesman for the world's largest tire maker, based in Ohio. "Oil is a major ingredient in the production of tires. It affects the cost to make tires, it affects the cost to heat or cool the plant where we make tires and of course the trucking cost to ship the tires."
Also, if automobile use slows down, tires will last longer on cars. But of course, people are always going to have to replace tires, and in fact, new tires help to increase fuel efficiency.
Currently Goodyear (NASD: GT) trades at a low PE (about 12.5 times next year's earnings), but is near the high of their 52-week range. They also carry significant debt. Still, this may be on to keep on radar.
Comments