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Goodyear (GT) Down 1.5% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Goodyear (GT). Shares have lost about 1.5% 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 its most recent earnings report in order to get a better handle on the important drivers.

Goodyear Q1 Earnings Beat Expectations

Goodyear Tire reported first-quarter 2024 adjusted earnings per share (EPS) of 10 cents, which surpassed the Zacks Consensus Estimate of breakeven earnings. The company had incurred a loss of 29 cents in the year-ago quarter.

The company generated net revenues of $4.53 billion, which declined 8.2% on a year-over-year basis and missed the Zacks Consensus Estimate of $4.78 billion due to lower replacement volume.

In the reported quarter, tire volume was 40.4 million units, down 3.3% from the year-ago period's levels.

Segmental Performance

In the reported quarter, the Americas segment generated revenues of $2.59 billion, which declined 9.7% year over year and missed our estimate of $2.76 billion due to lower volume and unfavorable price/mix. The segment registered an operating income of $179 million, which surged 126.6% from the year-ago period's figures. The operating margin benefited from lower transportation cost, Goodyear Forward initiatives and favorable net price/mix. The figure, however, missed our expectation of $211.3 million.

Revenues in the Europe, Middle East and Africa segment were $1.35 billion, down 9.7% from the year-ago period's levels due to lower replacement volume and unfavorable price/mix. The figure also missed our estimate of $1.55 billion. The operating income for the segment was $8 million, which remained flat on a year-over-year basis. Our estimate was pegged at an operating loss of $0.6 million.

Revenues in the Asia Pacific segment rose 3.4% year over year to $602 million due to higher original equipment volume and surpassed our estimate of $590.7 million. The segment’s operating profit was $60 million, up 57.9% from the year-ago quarter’s figure due to favorable net price/mix, higher volume and benefits from the Goodyear Forward plan.

Financial Position

Selling, general & administrative expenses rose to $696 million from $664 million in the year-ago period.

Goodyear had cash and cash equivalents of $893 million as of Mar 31, 2024, down from $902 million as of Dec 31, 2023.

Long-term debt and finance leases amounted to $7.48 billion as of Mar 31, 2024, up from $6.83 billion as of Dec 31, 2023.

Capital expenditure in the quarter was $318 million, up from $291 million reported in the year-ago quarter.

Updated 2024 Outlook

Based on recent commodity rates, the company expects a benefit of $325-$350 million on raw material costs in 2024.

Capital expenditures are expected in the range of $1.2-$1.3 billion.

For the full year, interest expenses are estimated between $520 million and $540 million. Depreciation and amortization is expected to be $1 billion.

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How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

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 20% 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 these revisions has been net zero. Notably, Goodyear has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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