On Dec 24, 2013, shares of The Goodyear Tire & Rubber Company (GT) reached a new 52-week high of $23.62 on the back of its strong fundamentals, innovative products and efficient capital management.
Goodyear reported a 28.3% rise in earnings per share to 68 cents in the third quarter of 2013 compared with 53 cents a year ago (all excluding special items). The earnings beat the Zacks Consensus Estimate of 66 cents. Net income escalated 28.9% to $183 million from $142 million in the prior-year quarter.
Goodyear is implementing a three-point plan to return its business to historical margins. In addition to its proposed exit from the farm tire business in the EMEA (Europe, the Middle East and Africa) region and the closure of a manufacturing plant in France, Goodyear is focusing on additional measures. This involves: 1) increasing its market share 2) expanding in emerging markets and 3) productivity improvements across the region totaling $75 million to $100 million over the next three years.
Moreover, Goodyear regularly launches innovative products to boost sales. The company is also trying to augment its shareholder value by capital deployment strategies. In Sep 2013, the company reinstated its quarterly cash dividend, which was discontinued from Dec 2002. The board of Goodyear also authorized a share repurchase program worth $100 million.
Goodyear reported positive earnings surprise in the last four quarters with an average surprise of 49.27%. The Zacks Consensus estimate for the company’s 2013 earnings per share stands at $2.52, up 34.19% over 2012.
Goodyear now expects its operating income for 2013 to surpass the previous guidance of $1.5 billion. The company predicts that the segment operating income will grow 10%–15% annually till 2016. Goodyear also aims to attain positive cash flow (excluding pension pre-funding) till 2016.
Goodyear currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks worth looking out for in the same industry include Continental AG (CTTAY), Tower International, Inc. (TOWR) and Gentex Corp. (GNTX). All these stocks carry a Zacks Rank #1 (Strong Buy).