The brokerage pointed out three compelling investment theses in favor of the company. The first factor is the convincing outlook supporting 10 percent plus SOI upside continuously. The second thesis is the defensive position, as the company gains 80 percent from replacement and favorable mix is mostly a pre-determined one. The third is that Goodyear could lift its cash payouts considerably to its shareholders.
Clear Roads Ahead?
The lead analyst pointed out that 90 percent of the company's free cash flow was used to pay either debt or pension in the last couple of years. However, this would change in the upcoming period and the $1 billion worth of free cash flow could be used to appease shareholders.
In a research note to clients, Deutsche Bank said, "Goodyear should be positioned to generate $1.0–1.1 billion annual free cash flow from their operations before pension and restructuring outflows. And we estimate $900 million–$1.0 billion after pension and restructuring."
The brokerage expects margins to be more resilient, upon which investors would assume Goodyear has met or topped the financial targets.
At time of writing, Goodyear was up 4.12 percent at $30.95.
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