JPMorgan Upgrades Goodyear Tire & Rubber After Q4 Earnings, Stock Pullback

Shares of Goodyear Tire & Rubber Co GT plummeted more than 27% on Friday, after management guided to softer-than-expected performance in 2022, citing inflation. The stock tumbled despite the company reporting “solidly better” results for the fourth quarter, according to JPMorgan.

The Goodyear Tire & Rubber Analyst: Ryan Brinkman upgraded the rating for Goodyear Tire & Rubber from Neutral to Overweight while reducing the price target from $25 to $23.

The Goodyear Tire & Rubber Takeaways: Conversations with investors suggest that they may have expected higher than consensus estimates, given the presumption of the company faring better than traditional auto parts suppliers in “passing along non-commodity supply chain costs because of the company’s greater reliance upon aftermarket vs. OE customers,” Brinkman said in the upgrade note.

“Overall, the sell-off strikes us as an overreaction…because pricing has been quite strong so far this cycle, with Goodyear posting its 6th consecutive positive quarterly Price/Mix-to-Raw Materials spread in 4Q, suggesting the possibility of better than currently envisaged ability to price for non-commodity costs,” the analyst wrote.

“Our outlook for 2022 SOI declines roughly -10%, to $1,500 mn from $1,668 mn prior, still reflecting a y/y improvement vs. pro-forma 2021,” he added.

GT Price Action: Shares of Goodyear Tire & Rubber were up 3.74% at $16.36 Monday.