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Goodyear 2Q profit doubles, beats predictions

Tuesday - 7/31/2012, 5:51pm  ET

AKRON, Ohio (AP) - Goodyear Tire & Rubber Co. said Tuesday that its second-quarter net income more than doubled as strong results in North America offset sharply lower earnings in Europe. Goodyear's profit beat Wall Street expectations and its stock jumped more than 10 percent.

Goodyear's results underscore the sharp divide in the auto and related industries, which are posting higher sales in the U.S. but still struggling with recession and the financial crisis in Europe.

Goodyear said operating income in its North American business grew 37 percent, even with it selling fewer tires. Income in Europe, the Middle East and Africa plunged 85 percent as the weak economy hurt tire sales.

"We are taking actions to manage our European business through this tough environment and ensure we are well-positioned for continued growth in targeted market segments," said Chairman and CEO Richard J. Kramer.

North American sales rose 1.7 percent to $2.45 billion, while sales in Europe, the Middle East and Africa fell a combined 18 percent to $1.6 billion.

Goodyear said it expects full-year tire sales volumes to fall 5 percent to 7 percent from 2011 levels.

Demand from North American automakers is expected to rise by 10 to 15 percent over 2011, offsetting a decline of 1 percent to 3 percent among consumers replacing old tires. Demand from both consumers and automakers in Europe, the Middle East and Africa is expected to fall.

Raw material costs are expected to rise about 7 percent for the year, Goodyear said.

The Akron, Ohio-based company reported net income of $85 million, or 33 cents per share, for the three months ended June 30. That's up from $40 million, or 16 cents per share, a year ago.

Excluding one-time items such as asset write-downs and debt-financing costs, Goodyear said it would have earned 57 cents per share. Analysts expected on that basis 45 cents per share, according to FactSet.

Revenue fell 8.4 percent to $5.15 billion from $5.62 billion a year ago. Analysts expected $5.74 billion.

Goodyear's shares gained $1.08 to close at $11.45. Despite Tuesday's surge, they are still down 19 percent in 2012.

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