The Goodyear Tire & Rubber Company (NASDAQ:GT) Just Released Its First-Quarter Earnings: Here's What Analysts Think
Shareholders might have noticed that The Goodyear Tire & Rubber Company (NASDAQ:GT) filed its first-quarter result this time last week. The early response was not positive, with shares down 4.1% to US$6.63 in the past week. The results don't look great, especially considering that statutory losses grew 430% toUS$2.65 per share. Revenues of US$3.1b did beat expectations by 2.9%, but it looks like a bit of a cold comfort. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
See our latest analysis for Goodyear Tire & Rubber
Following the recent earnings report, the consensus from ten analysts covering Goodyear Tire & Rubber is for revenues of US$12.9b in 2020, implying a definite 9.0% decline in sales compared to the last 12 months. Per-share statutory losses are expected to explode, reaching US$0.88 per share. In the lead-up to this report, the analysts had been modelling revenues of US$12.5b and earnings per share (EPS) of US$0.045 in 2020. Yet despite a small increase to revenues, the analysts are now forecasting a loss instead of a profit, which looks like a reduction in sentiment after the latest results.
There was no major change to the consensus price target of US$10.08, with growing revenues seemingly enough to offset the concern of growing losses. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Goodyear Tire & Rubber analyst has a price target of US$20.00 per share, while the most pessimistic values it at US$6.00. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. Over the past five years, revenues have declined around 2.8% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for a 9.0% decline in revenue next year. Compare this against analyst estimates for companies in the wider industry, which suggest that revenues (in aggregate) are expected to grow 5.7% next year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Goodyear Tire & Rubber to suffer worse than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts are expecting Goodyear Tire & Rubber to become unprofitable next year. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Goodyear Tire & Rubber analysts - going out to 2023, and you can see them free on our platform here.
Before you take the next step you should know about the 3 warning signs for Goodyear Tire & Rubber (1 makes us a bit uncomfortable!) that we have uncovered.
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