Goodyear (GT) Down 39.6% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Goodyear (GT). Shares have lost about 39.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Goodyear due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Goodyear Q4 Earnings & Revenues Miss Estimates

Goodyear Tire reported adjusted earnings per share of 19 cents in fourth-quarter 2019 compared with 51 cents in the prior-year quarter. Further, its earnings missed the Zack Consensus Estimate of 45 cents. The underperformance stemmed from lower revenues across all of its segments. The company reported adjusted net income of $45 million, down from $120 million in the year-ago quarter.

It delivered net revenues of $3,713 million, lower than $3,876 million reported in the year-ago quarter. Also, its revenues missed the Zacks Consensus Estimate of $3,804 million. The downside was due to lower industry volume and unfavorable foreign currency translation.

In the reported quarter, tire volume was 39.6 million units, down 2% from the year-ago quarter. Original equipment unit volume decreased 10% due to lower global vehicle production, while replacement tire shipments increased slightly from the year-ago quarter.

Segments in Detail

Revenues in the Americas segment declined year over year to $2.03 billion from $2.11 billion. The segment’s operating income was $152 million, down from $179 million recorded in fourth-quarter 2018. The year-over-year decline was driven by lower volume and weaker third-party chemical sales.

Revenues in the Europe, Middle East and Africa segment were $1.14 billion, down year over year from $1.21 billion. The segment’s operating income dipped 49% to $38 million. Lower volume along with unfavorable currency translations and higher conversion costs resulted in the weak performance.

Revenues in the Asia Pacific segment decreased 1% to $546 million due to lower sales in other tire-related businesses and unfavorable foreign currency translation. The segment’s operating income declined year over year to $52 million from $54 million amid higher selling, administrative and general expenses, and lower price/mix.

Dividend & Financial Position

The company declared a quarterly dividend of 16 cents a share, payable Mar 2, 2020, to shareholders of record as of Feb 3, 2020.

Goodyear had cash and cash equivalents of $908 million as of Dec 31, 2019, up from $801 million as of Dec 31, 2018. As of Dec 31, 2019, long-term debt and finance leases amounted to $4.75 billion, up from $5.11 billion as of Dec 31, 2018. The debt-to-capital ratio stands at 54%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -71.62% due to these changes.

VGM Scores

At this time, Goodyear has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Goodyear has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.