Here's Why Goodyear (GT) Makes for a Solid Investment Choice
The Goodyear Tire & Rubber Company GT is one of the largest tire manufacturing companies in the world. The company is set to gain from the acquisition of Cooper Tire, the Goodyear Forward plan and strategic restructuring in the EMEA segment.
The Zacks Consensus Estimate for Goodyear’s 2023 revenues and earnings per share is pegged at $20.3 billion and 5 cents, respectively.
Let us discuss the factors that highlight why Goodyear is an attractive pick.
Growth Indicators
Cooper Tire Buyout Serves as a Key Catalyst: The acquisition of Cooper Tire, which closed in June 2021, has strengthened Goodyear's leadership position in the U.S. tire industry and expanded its foothold in other North American markets. The complementary product offerings, scale expansion and value addition from both production and distribution standpoints are boosting the firm’s top line.
Goodyear Forward Transformation Plan: Goodyear's transformative initiative, dubbed Goodyear Forward, bodes well. The plan, designed to optimize the company's portfolio, enhance margins and reduce leverage, aims to unlock significant value for shareholders. With a goal to raise more than $2 billion from portfolio optimization, Goodyear is actively exploring strategic alternatives for its chemical, Dunlop and Off-the-Road equipment tire businesses. The tire manufacturer anticipates a run-rate benefit of $1.3 billion by 2025, driven by $1 billion in cost cuts and an additional $300 million from top-line actions. Positioned for substantial growth, Goodyear targets a doubled operating margin, moving from nearly 5% in 2023 to 10% by the end of 2025, aligning with debt reduction goals and a stronger financial profile.
Strategic EMEA Restructuring: Goodyear's strategic restructuring in the EMEA segment is likely to reap benefits. The company's focus on operational efficiency through streamlining product business units, centralizing functions and optimizing shared services is poised to enhance competitiveness and foster growth. The streamlining actions are expected to result in savings of $30-$35 million in 2024 and $100 million by 2025 from the 2022 baseline.
Praiseworthy Electrification Strides: Encouragingly, Goodyear has secured a leadership position in electric mobility by developing tires that will help transform its portfolios to include more energy-efficient and eco-friendly vehicles. The company regularly rolls out innovative products and services to boost sales and remain competitive in the market. The launch of Goodyear ElectricDrive GT, a best-in-class fit-for-purpose tire, especially for electric vehicles (“EVs”), is set to buoy prospects. Collaborations with companies like Plus, AutoFleet, Formant, ZF and Gatik demonstrate Goodyear’s efforts to cater to the changing dynamics of the auto industry.
AndGo and Goodyear Ventures in Focus: While the capital venture fund — Goodyear Ventures — intends to advance future mobility solutions over the next decade, Go is designed to be a seamless vehicle servicing platform that integrates predictive software with a trusted service network. The addition of TuSimple, a global autonomous trucking technology company, to Goodyear Ventures, augurs well. Goodyear Ventures also partnered with AmpUp. This deal will help GT provide consumers and fleets with solutions that unlock the full potential of EVs.
Favorable Style Score & Zacks Rank
GT carries an impressive Value Score of A. Value Score helps find stocks that are undervalued. The company currently holds a Zacks Rank #2 (Buy). Back-tested results have shown that stocks with a favorable Value Score, in combination with a solid Zacks Rank, are the best investment bets.
Other Key Picks
Some other top-ranked players in the auto space are Volvo VLVLY, Renault SA RNLSY and BYD Company Limited BYDDY, each sporting Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for VLVLY’s 2023 sales and earnings indicates year-over-year growth of 4.2% and 65.6%, respectively. The EPS estimates for 2023 and 2024 have increased by 32 cents and 11 cents, respectively, in the past 60 days.
The Zacks Consensus Estimate for RNLSY’s 2023 sales and earnings indicates year-over-year growth of 4.5% and 128.1%, respectively. The EPS estimates for 2023 and 2024 have increased by 15 cents and 2 cents, respectively, in the past 30 days.
The Zacks Consensus Estimate for BYDDY’s 2023 sales indicates year-over-year growth of 160.2%. The EPS estimates for 2023 and 2024 have increased by 59 cents and 55 cents, respectively, in the past 60 days.
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The Goodyear Tire & Rubber Company (GT) : Free Stock Analysis Report
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