Goodyear Tire & Rubber Co (NASDAQ: GT) struck a new 52-week low Monday after reporting a major earnings miss Friday and suffering an analyst downgrade.
Longbow Research analysts Anthony Deem and Brian Bollenbacher downgraded Goodyear to Underperform with a $14 price target.
Longbow anticipates swelling supply to create a price headwind, particularly as North American consumer capacity outpaces shipment in compound annual growth.
“We believe supply/demand imbalance in the Americas will continue to limit GT's pricing power over the next several years,” Deem and Bollenbacher wrote in a note.
By their estimates, the industry would need to record 4-percent CAGR through 2021 to maintain the current supply-demand ratio. With little faith in that achievement, they forecast an unfavorable balance for the next two years.
“With weak volume prospects, FX headwinds and no benefit from net cost savings, GT earnings growth is highly predicated upon an improving price/mix versus raw material spread,” Deem and Bollenbacher wrote.
The analysts estimate a $64 million headwind from pricing and mix as Goodyear’s “high-value added” supply constraints linger through 2019.
Altogether, Longbow anticipates less than $1.2 billion in annual segment operating income resulting in earnings per share below $2.
At time of publication, shares traded at $18.62. The stock had hit an intra-day low of $17.88 per share.
Deflated: 3 Reasons Why Morgan Stanley Turned Neutral On Goodyear
Goldman Sachs: Goodyear Tire Has 20% Downside Potential
Latest Ratings for GT
|Feb 2019||Longbow Research||Downgrades||Neutral||Underperform|
|Dec 2018||Deutsche Bank||Initiates Coverage On||Hold|
|Nov 2018||Morgan Stanley||Maintains||Equal-Weight||Equal-Weight|
View More Analyst Ratings for GT
View the Latest Analyst Ratings
See more from Benzinga
- Tesla's Stock Receives 'Buy' Upgrade On European Opportunity, EV Penetration
- This Day In Market History: GM Signs Auto's First Union Contract
- IPO Outlook For The Week: Biotechs And Another Virgin Group Addition
© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.