Top 3 Japanese Tire Stocks in 2025 As Per Morgan Stanley Research

Investing.com -- Japanese tire manufacturers are showing strong potential for growth despite recent challenges, according to Morgan Stanley’s latest analysis of the sector.

The investment bank maintains an "Attractive" view on Japanese tire stocks, citing differentiated strategies adapted to changing demand patterns and production capacity optimization as key drivers for future performance.

Most companies in the sector reported second-quarter profits that beat consensus estimates, with analysts projecting further growth in fiscal year 2025/26.

This optimism stems from price hikes in Japan and the US, improved product mix from growth in high-inch tires, and lower costs following production restructuring. Despite recent share price increases, valuations remain historically low, suggesting room for further upside.

Here are the top Japanese tire stocks according to Morgan Stanley:

Bridgestone: The company’s growth is primarily driven by business cost reductions and structural reforms that improve fixed costs. A complete earnings recovery will depend on top-line performance improvement, with key focus areas including revitalization of the Firestone brand in the US and sales expansion in India.

Bridgestone has reduced its estimated US tariff-related cost increases for fiscal 2025 to ¥25 billion from ¥45 billion, expecting to offset this through price hikes and cost reductions. The company’s high US production ratio for tires sold in the US (approximately 60% for passenger vehicles and 70% for commercial vehicles) provides a significant competitive advantage.

Yokohama Rubber: Morgan Stanley expects the company’s OE agricultural tire demand, particularly for Europe and the US markets, to begin recovering in the second half of fiscal 2025. Additional growth drivers include expansion in general tire sales in Western markets and cost improvement measures.

Yokohama has reduced its US tariff-related cost estimate to ¥14 billion for fiscal 2025 (down from ¥16.5 billion) and plans to absorb these costs through price increases and cost reductions. While sustainability of general tire sales growth requires caution, the OHT segment offers significant medium-term upside potential through plant restructuring and M&A-driven synergies.

Toyo Tire: The company continues to see strong WLTR (US) sales, supported by replacement demand for hobby use that emerged during pandemic stay-at-home trends. This has contributed significantly to mix improvement. Restructuring of the European sales network is expected to positively impact results in fiscal 2026.

Approximately 50% of Toyo’s tires sold in the US are produced domestically, with the majority of WLTR tires being US-made. The company estimates US tariff-related costs at ¥12.6 billion for fiscal 2025. Looking ahead to the medium-term management plan starting in fiscal 2026, analysts are focusing on how Toyo will balance growth through capacity expansion with enhanced shareholder returns.

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