Morgan Stanley has published its latest review of the Japanese tire sector and kept Overweight (OW) recommendations on two prominent manufacturers, signaling confidence in their near-term prospects despite divergent market pressures.
The bank's note concentrates on firms best positioned to extract value from North American demand patterns while navigating industry-specific risks.
Toyo Tire
Morgan Stanley maintained an Overweight rating on Toyo Tire, pointing to elevated expectations for the company as investors look ahead to its Medium-Term Plan, which is scheduled to be announced on March 4. Analysts see additional upside tied to the ongoing market repricing for demand in the Wide Light Truck Radial (WLTR) segment in North America - a market where Toyo has an established foothold.
Bridgestone
Bridgestone also retained an Overweight designation. The firm is noted for efforts to revive the Firestone brand in North America, and Morgan Stanley highlights constructive expectations about the potential effects of the company’s restructuring actions. At the same time, analysts caution that original equipment (OE) demand for Truck and Bus Radial (TBR) tires appears weak in both North and South America, even as replacement demand in these regions remains solid.
Implications for investors and sector participants
Morgan Stanley’s view singles out North American demand dynamics - particularly in WLTR and replacement tire markets - as a key driver for upside potential among these Japanese manufacturers. The assessment balances optimism around strategic initiatives and product-specific demand with caution about cyclical OE weakness in certain commercial tire segments.
Investors assessing exposure to the tire and broader auto-supply sectors may weigh these company-specific catalysts and regional demand signals when considering allocation or valuation assumptions.