Goodyear Tire & Rubber Co. GT -27.44% lost more than a quarter of its market value Friday after the tire manufacturer said it expects significant pressure from rising input prices to persist into 2022.
With Goodyear’s costs rising for everything from labor to commodities to shipping, the company projected it will face meaningfully higher prices through the first half of 2022. Raw materials alone will likely cost the company $700 million to $800 million more in the six months through June compared with a year earlier, executives said. They added that logistics and energy expenses are also on an uptrend.
“We are seeing these impacts throughout our cost base,” Chief Executive Richard J. Kramer said. He added that pressure from higher prices is likely to continue over the next several quarters.
The company’s outlook for facing inflation deeper into 2022 serves as another sign that the trend of higher prices across the economy may be less temporary than some forecasters had hoped. Higher raw-materials costs could also persist into the second half of 2022, which would raise Goodyear’s expenses by hundreds of millions of dollars more, Mr. Kramer said.
Shares of the Akron, Ohio-based tire company closed on Friday at $15.78 apiece, down 27%. Coming into Goodyear’s fourth-quarter earnings report, the stock had been mostly flat so far this year.
The selloff came despite solid financial results to end 2021. Goodyear’s sales grew 38% to $5.05 billion in the last three months of the year—in part due to the acquisition of Cooper Tire & Rubber Co., completed last spring. Adjusted earnings of 57 cents a share beat Wall Street’s expectations, according to FactSet’s survey.
Forecasts for higher input costs are denting how much cash the company expects to pull in after paying expenses.
Finance chief, Darren Wells, projected that free cash flow, a measure of operational profitability, will roughly break even in 2022, a disappointment to analysts who had forecast a positive result.
Goodyear said one of its challenges has been the breadth of the cost increases that it is seeing across its business. The company can likely offset higher raw materials this year with higher prices and a better product mix, Mr. Kramer said. But the tire maker also is dealing with greater energy and transportation expenses and a tight labor market.
“The real challenge in terms of 2022 earnings is going to be addressing inflation in other costs” besides raw materials, Mr. Kramer said.
Data on rising consumer prices in January released Thursday underscored that the higher inflation that began roiling the economy last year has persisted into 2022. The consumer-price index rose by 7.5% last month, the fastest increase in decades.
Customers are likely facing higher tire prices no matter whom they buy from, Goodyear executives said. Eight of the company’s top nine competitors have also put through price increases either in 2022 or at the end of last year, Mr. Wells said.
Write to Matt Grossman at [email protected]
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