The Goodyear Tire & Rubber Company (GT - Analyst Report) is one of the world’s largest tire manufacturing companies, selling under Goodyear, Kelly, Dunlop, Fulda, Debica, Sava and various other brands. The company regularly launches innovative products and services to boost sales. Although Goodyear generates worldwide sales, North America is its leading market.It is also expanding in emerging markets to boost profits.
Goodyear is benefitting from lower raw material costs, strong economic trends in North America and continued cost savings, partially offset by a challenging international environment and unfavorable foreign currency translation due to the continuing strength of the U.S. dollar. Goodyear’s revenue has been declining over the years. The company has also been facing challenges in terms of a volatile political and economic environment and high currency fluctuations in Latin America.
Estimate Trend & Surprise History
Investors should note that the fourth-quarter earnings estimates for Goodyear inched down by a cent over the last 30 days.
Meanwhile, the company delivered positive earnings surprises in each of the last four quarter with an average beat of 9.06%. Investors have been eagerly awaiting Goodyear’s latest earnings report to see whether it delivers an earnings beat in the fourth quarter as well.
Zacks Rank
Goodyear currently has a Zacks Rank #2 (Buy), but that could change following its earnings report which was just released. We have highlighted some of the key stats from the company’s earnings announcement below:
Earnings Surpass Estimates, Rise Y/Y
Goodyear reported adjusted earnings of 93 cents per share in the fourth quarter of 2015, comfortably surpassing the Zacks Consensus Estimate of 74 cents. Adjusted earnings were higher than 59 cents generated in the year-ago quarter.
Revenues Beat Estimates, Fall Y/Y
Goodyear logged revenues of $4.06 billion, marginally beating the Zacks Consensus Estimate of $4.03 billion. However, revenues were lower than $4.36 billion posted a year ago, mainly due to unfavorable foreign currency translation.
Key Stats/Developments to Note
Goodyear’s full-year segment operating income exceeded $2 billion for the first time ever.
Goodyear expects annual segment operating income to increase 10–15% in 2016. The company is aiming for segment operating income of a record $2.1–$2.2 billion this year, following the deconsolidation of its Venezuelan subsidiary. The company also aims to generate positive free cash flow (excluding pension pre-funding) over this period.
During the reported quarter, Goodyear repurchased 3 million shares of its common stock for $100 million. On Feb 4, 2016, the company’s Board of Directors authorized a $650 million increase in the share repurchase program to $1.1 billion.
On Dec 1, 2015, Goodyear announced that it has decided to combine its North America and Latin America businesses into one Americas business unit. The change was implemented from Jan 1, 2016 and the company will report its segment financial results according to the new organizational structure in future.
Market Reaction
Goodyear’s share price has gained 0.61% so far in pre-market trading following the release. Clearly, the initial reaction to the release is positive.
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