Morgan Stanley reviewed Japan’s tire sector following second-quarter earnings, highlighting mixed performances among the industry’s major companies. The firm maintained an In-Line rating on the sector overall, with individual stock views ranging from cautious optimism to concerns over near-term challenges.
Bridgestone Reports Strong Second Quarter
Bridgestone delivered the strongest results among the group, with Morgan Stanley describing its second-quarter performance as positive. Adjusted operating profit increased 28.8% year-over-year to ¥158.7 billion, supported by improving volumes and favorable foreign exchange movements.
The company maintained its full-year guidance of ¥515.0 billion. Morgan Stanley sees potential upside if Bridgestone continues gaining market share in North America, although price competition in the small tire segment remains a risk factor. The firm rates Bridgestone Equal-weight.
Bridgestone’s second-quarter adjusted operating profit exceeded market consensus expectations of ¥120 billion, helped by market share gains despite challenging conditions.
Yokohama Rubber Benefits From Favorable Conditions
Yokohama Rubber also posted a positive quarter, with business profit rising 35.1% year-over-year to ¥51.4 billion. Results were supported by favorable foreign exchange movements, raw material costs and improvements in pricing and product mix.
The company raised its full-year guidance from ¥188.0 billion to ¥192.5 billion. Morgan Stanley sees additional upside potential from conservative second-half assumptions on fixed costs and pricing, as well as possible synergies from OHT integration. The firm maintains an Equal-weight rating on the stock.
Yokohama Rubber’s second-quarter business profit exceeded consensus expectations of approximately ¥45 billion.
Sumitomo Rubber Faces Lower Guidance
Sumitomo Rubber delivered results that Morgan Stanley classified as neutral. While second-quarter business profit increased 62% year-over-year, the company lowered its full-year guidance from ¥112.0 billion to ¥96.0 billion.
The reduction reflected expectations for weaker momentum in Europe and North America during the second half. Morgan Stanley noted that cost-cutting efforts under Project ARK and initiatives to strengthen the Dunlop brand could help limit further downside. The firm rates Sumitomo Rubber Equal-weight.
Toyo Tire Sees Weak Quarter but Maintains Upside View
Toyo Tire reported a weaker quarter, with operating profit declining 34.4% year-over-year. The decline was attributed to system disruptions and weak volumes, leading the company to reduce its guidance to ¥90.0 billion.
Despite the challenges, Morgan Stanley maintains an Overweight rating on Toyo Tire. The firm expects a second-half sales recovery and highlighted resolved shipment issues, strong WLTR demand, the dissolution of the Mitsubishi Corp alliance and a share buyback program designed to improve return on equity.
