* Q3 EPS ex-items 45 cents, Wall St view 40 cents
* Key N. American results lag analyst forecasts
* Sees Q4 N.America earnings down $75 mln-$125 mln vs Q3
* Shares drop 18.9 percent (Adds share prices, company and analyst comments, byline)
By Soyoung Kim
DETROIT, Oct 28 (Reuters) - Goodyear Tire & Rubber Co GT.N forecast a fourth-quarter operating loss for its key North America unit that is significantly worse than analysts’ expectations, sending its shares down nearly 19 percent.
The outlook overshadowed news of a higher-than-expected quarterly profit from the largest U.S. tire maker on Wednesday. Goodyear, which benefited from cost cuts, also said global industry demand should grow in 2010, after the economic downturn forced consumers to delay replacing tires and automakers to slash production this year.
But the results at Goodyear North America Tire widely missed Wall Street estimates. The unit, the company’s largest, just returned to profitability in the third quarter from losses earlier this year.
Goodyear also said it expected U.S. tire sales to fall back in the current quarter, partly due to the end of the “Cash for Clunkers” program, which briefly boosted U.S. auto sales in July and August and pulled ahead demand from the future.
While the North American unit reported earnings of $2 million, an improvement from a year-earlier loss of $19 million, they were much weaker than the $113 million profit projected by JPMorgan analyst Himanshu Patel.
Goodyear Chief Executive Officer Bob Keegan said on a conference call with analysts that North America earnings would be down by $75 million to $125 million in the current quarter from the third quarter.
“That’s enormous,” said KeyBanc Capital Markets analyst Saul Ludwig. “That probably explains why the stock is getting mangled.”
Keegan said Goodyear expected earnings to improve in North America starting in 2010.
“We had some things that might have influenced third quarter upward that we don’t expect to recur in the fourth quarter,” he said.
“You could say part of it could be pulled ahead from the Cash for Clunkers,” Keegan added. “None of this speaks to the health of the business.”
Auto industry stocks, including Goodyear’s, have tumbled this week, even though some companies posted earnings above Wall Street forecasts, as investors scale back expectations for the pace of a U.S. recovery for the sector.
U.S. auto sales are down nearly 30 percent so far this year and projected to end 2009 at just above 10 million units, down from 13.2 million in 2008.
Shares of BorgWarner Inc (BWA.N), which posted a better-than-expected quarterly profit on Wednesday, were down 5.7 percent. Johnson Controls Inc (JCI.N) fell for a second session on Wednesday even after it provided forecasts for higher 2010 earnings on Tuesday.
Goodyear’s third-quarter net profit came to $72 million, or 30 cents per share, compared with $31 million, or 13 cents per share, a year earlier.
Excluding one-time items, Goodyear posted earnings per share of 45 cents, while analysts on average had expected 40 cents on that basis, according to Thomson Reuters I/B/E/S.
Revenue declined 15 percent to $4.4 billion. Analysts had expected $4.26 billion.
Sales in Europe were down 18 percent at $1.6 billion, while operating income fell to $106 million from $134 million. JPMorgan’s Patel had expected a $67 million profit for Europe.
The company reduced its workforce by about 5,800 positions in the first nine months of the year, exceeding its full-year target of cutting 5,000 jobs, and tire inventory was down by more than $1 billion from the end of 2008.
These actions helped Goodyear achieve $540 million in cost savings so far this year, the company said.
Goodyear is in a long-term restructuring that is taking out excess production capacity worldwide to focus on more expensive tires that command higher profit margins.
Shares of Goodyear plummeted 18.9 percent to $13.57 in morning trading on the New York Stock Exchange. (Reporting by Soyoung Kim, editing by Dave Zimmerman, Maureen Bavdek and Lisa Von Ahn)