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On Sep 27, 2013, Zacks Investment Research raised Goodyear Tire & Rubber Company (GT - Analyst Report) to Outperform from Neutral. The recommendation upgrade of this Zacks Rank #1 (Strong Buy) stock was based on improving earnings, higher guidance, a new capital deployment policy and its focus on the emerging markets of Latin America, Eastern Europe and Asia.

Why the Upgrade?

Goodyear reported a 33.3% rise in earnings per share to 76 cents in the second quarter of 2013 compared with 57 cents a year ago (all excluding special items). The reported earnings outpaced the Zacks Consensus Estimate of 48 cents. Net income escalated 36.5% to $202.0 million from $148.0 million in the second quarter of 2012.

Since then, the Zacks Consensus Estimate for Goodyear’s 2013 earnings per share has increased 13% to $2.41, up 28% year over year. Also, the estimate for 2014 earnings has surged 10% to $2.76 per share, up 14.5% year over year.

Goodyear is trying to boost its shareholder value by undertaking capital deployment strategies. The company has reinstated its quarterly cash dividend, which was discontinued since Dec 2002. The board also authorized a share repurchase program worth $100 million. Moreover, Goodyear regularly launches innovative products to boost sales.

Goodyear raised its operating income guidance for 2013 to $1.5 billion, which is the higher end of the previous guidance range of $1.4–$1.5 billion. The company expects the segment's operating income to grow 10%–15% through 2016.

Other Stocks to Consider

Other stocks that are also worth considering in the same industry include Continental AG (CTTAY), American Axle & Manufacturing Holdings Inc. (AXL - Analyst Report) and Fuel Systems Solutions, Inc. (FSYS - Snapshot Report). Both American Axle and Fuel Systems carry a Zacks Rank #1 (Strong Buy), while Continental AG carries a Zacks Rank #2 (Buy).

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