U.S. Markets closed

Balanced View on Goodyear

Zacks Equity Research

On Jun 16, 2014, we issued an updated research report on The Goodyear Tire & Rubber Company (GT).

The company reported positive earnings surprises in 3 of the trailing 4 quarters. Goodyear reported an impressive 33.3% rise in earnings per share to 56 cents in the first quarter of 2014 from 42 cents a year ago (all excluding special items). However, earnings missed the Zacks Consensus Estimate of 60 cents. Net income escalated to $156 million from $118 million in the first quarter of 2013.

Revenues in the quarter fell 8.2% year over year to $4.5 billion, also missing the Zacks Consensus Estimate of $4.75 billion. The decrease in revenues can be attributed to a $202 million impact of lower sales in other tire-related businesses, specifically due to a decline in third-party chemical sales in North America.

Moreover, Goodyear’s capital deployment strategy, innovative product launches and efforts to improve margins are yielding results. However, weakness in Latin America, rising long-term debt and capital expenditure and falling cash balance are reasons for concern.

Goodyear currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for the company’s 2014 earnings stands at $2.87 per share, up 9.41% from 2013.

Goodyear projects that the segment operating income will grow 10–15% annually till 2016. It also aims to attain positive cash flow (excluding pension pre-funding) till 2016. Moreover, the company expects a 2–3% increase in unit volumes in 2014.

Key Picks from the Sector

Some better-ranked automobile stocks worth considering include Fox Factory Holding Corp (FOXF), Gentherm Incorporated (THRM) and Tower International, Inc. (TOWR). All these stocks sport a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on GT
Read the Full Research Report on THRM
Read the Full Research Report on TOWR
Read the Full Research Report on FOXF

Zacks Investment Research