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Will Goodyear's (GT) Earnings Outshine Estimates in Q3?

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The Goodyear Tire & Rubber Company (GT - Free Report) is set to report third-quarter 2016 results on Oct 28. In the last quarter, this tire manufacturer posted a positive earnings surprise of 11.54%. Let us see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Goodyear is likely to beat earnings this quarter because it has the right combination of the two key components.

Zacks ESP: Earnings ESP for Goodyear is currently pegged at +1.75% as the Most Accurate estimate of $1.16 stands above the Zacks Consensus Estimate of $1.14. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

GOODYEAR TIRE Price and EPS Surprise

 

GOODYEAR TIRE Price and EPS Surprise | GOODYEAR TIRE Quote

Zacks Rank: Goodyear currently sports a Zacks Rank #1 (Strong Buy). Note that stocks with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings. Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

The combination of Goodyear’s Zacks Rank #1 and positive ESP makes us reasonably confident of an earnings beat.

What is Driving the Better-than-Expected Earnings?

Goodyear regularly launches innovative products and services to boost sales. The company is benefiting from lower raw material costs, strong economic trends in North America and continued cost savings. Further, Goodyear has been redeeming some of its outstanding senior notes using the proceeds from the offering of new senior notes with lower interest rate. These transactions will reduce the interest expense of the company. The removal of Sumitomo Rubber’s minority interest in Goodyear Dunlop Tires Europe B.V. is also expected to augment Goodyear’s earnings.

The company attained record high segment operating income in 2013, 2014, 2015 and the first half of 2016. It aims to achieve segment operating income of a record $2.1–$2.2 billion this year. This raises expectations of record high figures in the third quarter as well.

Stocks that Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Standard Motor Products Inc. (SMP - Free Report) , which is expected to report third-quarter 2016 results on Nov 3, has an Earnings ESP of +4.44% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Fox Factory Holding Corp (FOXF - Free Report) has an Earnings ESP of +2.56% and a Zacks Rank #1. The company will report third-quarter 2016 financial numbers on Nov 2.

Magna International Inc. (MGA - Free Report) has an Earnings ESP of +1.67% and a Zacks Rank #2 (Buy). The company is expected to release third-quarter 2016 results on Nov 3.

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