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Why Is Goodyear (GT) Down 14.2% Since Last Earnings Report?

Zacks Equity Research
Coke (KO) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

A month has gone by since the last earnings report for Goodyear (GT). Shares have lost about 14.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Goodyear due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Goodyear Earnings Miss Estimates in Q4, Decrease Y/Y

Goodyear Tire has reported adjusted earnings per share of 51 cents in fourth-quarter 2018 compared with 99 cents in the prior-year quarter.

The bottom line missed the Zack Consensus Estimate of 60 cents. The company reported net income of $110 million against net loss of $96 million in the year-ago quarter.

The company delivered net revenues of $3.88 billion, lower than $4.07 billion in the year-ago quarter. The top line missed the Zacks Consensus Estimate of $3.93 billion. During the quarter under review, revenues were impacted by lower volume and currency fluctuations. These effects were partly offset by improvements in price/mix.

During the reported quarter, tire unit volume was 40.7 million, down3% from the year-ago quarter. Replacement tire shipments were nearly flat while original equipment unit volume fell 10% from the prior-year quarter.

Segmental operating income was $307 million, down from $430 million in fourth-quarter 2017.

2018 Results

For 2018, adjusted earnings per share were $2.32, down from $3.12 in 2017.

Revenues in 2018 were $15.5 billion, up 1% from the 2017 figure.

Segment Details

Revenues in the Americas’ segment declined year over year from $2.18 billion to $2.11 billion. Segment’s operating income was $179 million, down from $217 million in fourth-quarter 2017.

Revenues at the Europe, Middle East and Africa segment were $1.21 billion, down 4% year over year. The segment’s operating income decreased 23% to $74 million.
 
Revenues at the AsiaPacific segment declined 11% to $552 million. The segment’s operating income declined to $54 million year over year from $117 million.

Financial Position

Goodyear had cash and cash equivalents of $801 million as of Dec 31, 2018, down from $1.04 billion as of Dec 31, 2017. Long-term debt and capital leases amounted to $243 million as of Dec 31, 2018, up from $391 million as of Dec 31, 2017.

Capital Deployment

During the reported quarter, Goodyear repurchased 897000 shares for $20 million under the previously announced $2.1-billion share buyback program.

Since the beginning of the program in 2013, the company has bought back 52.9 million shares for $1.5 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -71.79% due to these changes.

VGM Scores

At this time, Goodyear has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Goodyear has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.



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