Updated Research Report on Goodyear - Analyst Blog

On Apr 2, 2014, we issued an updated research report on The Goodyear Tire & Rubber Company GT.

This Zacks Rank #3 (Hold) stock reported positive earnings surprises in the trailing four quarters with an average beat of 32.21%. Goodyear posted an 89.7% rise in earnings per share to 74 cents in the fourth quarter of 2013, beating the Zacks Consensus Estimate of 63 cents.

However, revenues fell 5% year over year to $4.8 billion, missing the Zacks Consensus Estimate of $5.02 billion. The drop in revenues was due to lower sales in other tire-related businesses, particularly due to a decline in third-party chemical sales in North America, a lower price/mix and an unfavorable foreign currency translation.

Goodyear regularly launches innovative products to boost sales. The company is also trying to boost its shareholder value through capital deployment strategies.

However, Goodyear faces pricing pressure from original equipment manufacturers (OEMs) due to weak industry demand. This negatively impacts the company's profit margins as it sells about 30% of its tires to OEMs. Moreover, the company's long-term debt and capital leases balance is rising, while cash flow from operations is falling.

For the period 2014–2016, Goodyear expects annual segment operating income to increase 10–15%. Moreover, the company expects a 2–3% increase in unit volumes in 2014.

The Zacks Consensus Estimate for Goodyear's 2014 earnings per share is $2.94, up 12.16% over 2013.

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