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Goodyear's (GT) Q1 Earnings Beat, Down Y/Y, Revenues Up

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The Goodyear Tire & Rubber Company (GT - Free Report) reported adjusted earnings per share of 50 cents in comparison with 74 cents in the prior-year quarter. However, the bottom line surpassed the Zack Consensus Estimate of 44 cents. The company reported net income of $75 million, down from $166 million in first-quarter 2017.

Goodyear reported net revenues of $3.83 billion, higher than $3.70 billion recorded in the year-ago quarter. Also, the figure surpassed the Zacks Consensus Estimate of $3.81 billion.

During the quarter under concern, tire unit volumes were 39 million, down 2.5% from first-quarter 2017. Replacement tire shipments declined 2% while original equipment unit volume slipped 4% in comparison with the prior-year quarter.

Segment operating income dropped to $281 million in the reported quarter from $390 million a year ago.

Segment Details

Revenues at the Americas’ segment declined 2% year over year to $1.9 billion, reflecting a decline in unit volume. Driven by higher raw material costs and lower price/mix, segment operating income plunged 41% to $127 million.

Revenues from Europe, Middle East and Africa segment were $1.3 billion, up 7% year over year. This upside was driven by an improved price mix and a favorable foreign currency translation. The segment’s operating income decreased 23% to $78 million. This was due to high raw material costs, which was more than offset by improvements in price/mix and lower volume.

Revenues from the Asia-Pacific segment grew 14% to $571 million, reflecting an improved price mix, favorable foreign currency translation and higher tire volumes. The segment’s operating income rose 4% to $76 million, from $103 million a year ago. This rise is driven by a higher volume and reduced conversion costs.

Financial Position

Goodyear had cash and cash equivalents of $837 million as of Mar 31, 2018, down from $1.04 billion as of Dec 31, 2017. Long-term debt and capital leases amounted to $5.6 billion as of Mar 31, 2018, up from $5.08 billion as of Dec 31, 2017.

On Mar 31, 2018, the company recorded total cash flow of $389 million from operating activities in comparison with $286 million, recorded at the end of comparable quarter last year. Also, capital expenditure for the period decreased to $248 million from $271 million a year ago.

Capital Deployment

During the reported quarter, Goodyear repurchased around 875 thousand shares for $25 million, under the previously announced $2.1 billion share repurchase program.

Since the share repurchase program in 2013, Goodyear repurchased total 45 million shares for $1.3 billion.

Outlook

Goodyear reaffirms its 2018 operating income guidance and expects it to be between $1.8 billion and $1.9 billion.

The company also confirmed its 2020 segment operating income target of $2 to $2.4 billion.

Zacks Rank & Key Picks

Goodyear carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space include Fox Factory Holding Corp. (FOXF - Free Report) , Allison Transmission Holdings, Inc. (ALSN - Free Report) and Honda Motor Co., Ltd. (HMC - Free Report) , each carrying a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1Rank (Strong Buy) stocks here.

Fox Factory Holding has an expected long-term growth rate of 10.5%. In the past year, shares of the company have returned 15.8%.

Allison Transmission has an expected long-term growth rate of 10%. In a year, shares of the company have advanced 3.9%.

Honda has an expected long-term growth rate of 4.8%. In a year’s time, shares of the company have returned 17.5%.

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