Bear of the Day: Goodyear Tire & Rubber (GT)
Goodyear Tire & Rubber Company (GT) is one of the world’s leading tire companies and is one of the most recognized names in the business. It operates through three segments—the Americas; Europe, the Middle East, and Africa; and Asia Pacific—developing, manufacturing, marketing, and distributing tires for most applications.
Q4 Earnings Miss Estimates, Down YoY
Recently, Goodyear reported disappointing results in its fiscal 2018 fourth quarter.
Adjusted earnings of 51 cents missed the Zacks Consensus of 60 cents and fell considerably from the 99 cents per share reported in the year-ago quarter.
Revenues of $3.88 billion missed our consensus estimate and fell 5% compared to Q4 2017.
Tire unit volume hit 40.7 million, down 3% year-over-year. Replacement tire shipments were basically flat while original equipment unit volume fell 10% from the prior-year period.
Falling Estimates
Analysts have since turned bearish on Goodyear, with five cutting estimates in the last 60 days for the current fiscal year. The Zacks Consensus Estimate has dropped 70 cents during that same time period from $2.91 to $2.21 per share.
This sentiment has stretched into 2020, and our consensus estimate has dropped 69 cents in the past two months.
GT is now a Zacks Rank #5 (Strong Sell).
Bottom Line
For some time now, Goodyear has struggled with slowing demand in Asia, specifically in China. Revenues in its Asia-Pacific segment declined 11% year-over-year to $552 million in Q4.
The tire giant has also been impacted by commodity prices, as well as tariffs, which have raised its material costs. As some signs point to weakening global economic growth, Goodyear will likely continue to be impacted by these macroeconomic headwinds,
But, GT is only trading at 8.7X its forward fiscal 2019 earnings, and has a dividend yield of 3.3%. Goodyear could be a pretty good value pick, particularly with that dividend, but you’ll have to be ready to ride out those macroeconomic headwinds.
If you’re an investor interested in adding a stock from the broad automotive sector to your portfolio, consider General Motors (GM). Shares of GM, which is one of the biggest domestic auto manufacturers here in the U.S., has gained over 18% since January.
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