The Goodyear Tire & Rubber Company (GT - Analyst Report) reported a 20.3% fall in adjusted earnings per share to 59 cents in the fourth quarter of 2014 from 74 cents a year ago (all excluding special items). However, earnings marginally surpassed the Zacks Consensus Estimate of 58 cents. Adjusted net income plunged 20.6% to $166 million from $209 million in the fourth quarter of 2013.

The Goodyear Tire & Rubber Company - Earnings Surprise | FindTheBest

Including special items, the company reported net income of $2.1 billion or $7.68 per share in the quarter, surging from $228 million or 84 cents per share a year ago.

Revenues in the quarter fell 9.1% year over year to $4.36 billion, marginally missing the Zacks Consensus Estimate of $4.39 billion. The drop in revenues can be attributed to unfavorable foreign currency translation and a decline in sales volume in Europe, Middle East and Africa.

Tire unit volumes amounted to 39.5 million in the fourth quarter of 2014. Original equipment unit volume fell 1%, primarily due to weak industry conditions in Latin America. Replacement tire shipments went down 4% owing to lower sales of winter tires in Europe due to high winter temperatures.

Segment operating income fell 14.3% to $359 million in fourth-quarter 2014 from $419 million a year ago. The year-over-year decrease was due to lower price/mix and decline in volumes, which offset the impact of decline in raw material costs and other cost-saving initiatives.

Full-Year 2014 Performance

Goodyear’s earnings increased significantly to $2.83 per share for full-year 2014 from $2.63 in 2013, marginally surpassing the Zacks Consensus Estimate of $2.82. Revenues for full-year 2014 decreased 7.2% to $18.14 billion from $19.54 billion in 2013, missing the Zacks Consensus Estimate of $18.18 billion.

Segment Details

Revenues at the North America segment declined 1% year over year to $2.1 billion. The deterioration was a result of unfavorable currency translation and a 1% decline in tire unit volume to 16 million units, which offset the improved price/mix. Original equipment unit volume was flat year over year, while replacement tire shipments fell 1%.

Revenues from the Europe, Middle East and Africa segment decreased 20% to $1.3 billion. Revenues were hurt by a decline in tire unit volume, lower price/mix and unfavorable currency translation. Tire unit sales fell 11.1% to 12.8 million units. Original equipment unit volume was down 5% while replacement tire shipments went down 15% year over year due to lower sales of winter tires.

Sales in the Latin America segment fell 12% to $434 million due to unfavorable foreign currency translation, which offset the increase in tire unit volumes. Tire unit sales improved 8% to 4.7 million units. Original equipment unit volume was down 24% owing to a weak performance in Brazil, while replacement tire shipments improved 20% year over year.

Revenues from the Asia Pacific segment fell 5% to $511 million due to unfavorable price/mix and foreign currency translation. This was partly offset by a 7% increase in tire unit volume to 6 million units. Original equipment unit volume was up 15%, while replacement tire shipments were flat year over year.

Financial Position

Goodyear had cash and cash equivalents of $2.16 billion as of Dec 31, 2014, down from $3.0 billion as of Dec 31, 2013. Long-term debt and capital leases amounted to $6.36 billion as of Dec 31, 2014, up from $6.24 billion as of Dec 31, 2013.

Cash flow from operations declined to $340 million in 2014 from $938 million in the year-ago period. Meanwhile, capital expenditure stood at $923 million compared with $1.17 billion in the same period a year ago.

Business Update

Goodyear announced that it will launch an eCommerce platform later this year, which will allow online purchase of tires from its website.

Dividend Update

Goodyear paid a quarterly dividend of 6 cents per share on Dec 1, 2014. The company also declared a quarterly dividend of 6 cents per share payable on Mar 2, 2015 to shareholders of record as on Feb 2.

Stock Update

Goodyear repurchased 5.7 million shares for $150 million during the quarter under its previously announced $450 million share repurchase program. The company repurchased 8.9 million shares for $233 million during 2014.

Guidance

For the period 2015–2016, Goodyear expects annual segment operating income to increase 10–15%. The company also targets achieving positive annual free cash flow over this period.

Goodyear is one of the largest tire manufacturing companies in the world. The company currently carries a Zacks Rank #3 (Hold). Better-ranked automobile stocks include Superior Industries International, Inc. (SUP - Analyst Report), Tata Motors Ltd. (TTM - Snapshot Report) and Wabash National Corp. (WNC - Snapshot Report), all sporting a Zacks Rank #1 (Strong Buy).