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Goodyear (GT) Q3 Earnings Miss Estimates, Deteriorate Y/Y
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The Goodyear Tire & Rubber Company (GT - Free Report) reported adjusted earnings per share of 68 cents compared with 70 cents in the prior-year quarter. The bottom line missed the Zack Consensus Estimate of 76 cents. The company reported net income of $351 million, up from $129 million in the year-ago quarter.
The company delivered net revenues of $3.93 billion, slightly higher than $3.92 billion in the year-ago quarter. The top line was almost in line with the Zacks Consensus Estimate.
During the quarter, tire unit volumes were 40.5 million, up 2% from the year-ago quarter. Replacement tire shipments rose 4% while original equipment unit volume fell 4% from the prior-year quarter.
Segment operating income was $362 million, almost flat year over year.
The Goodyear Tire & Rubber Company Price, Consensus and EPS Surprise
Revenues in the Americas’ segment improved slightly year over year from $2.04 billion to $2.10 billion, which reflects increases in price/mix, increase volume and higher third-party chemical sales. Segment operating income came in at $194 million, nearly flat year over year. Modest decline was due to higher conversion costs, impact of reduced price/mix, unfavorable foreign currency translation and increased cost of raw material.
Revenues at the Europe, Middle East and Africa segment were $1.3 billion, down 2% year over year due to unfavorable foreign currency translation, partially offset by increased volume and favorable price/mix. The segment’s operating income increased 23% to $111 million. This was mainly driven by lower raw material costs, favorable price/mix, partially offset by unfavorable foreign currency translation and higher selling, administrative and general (SG&A) expenses.
Revenues at the Asia-Pacific segment declined 7% to $531 million, reflecting a drop in tire volumes and adverse foreign currency translation. The segment’s operating income declined to $57 million year over year due to higher SG&A expenses, partially because of higher bad debt expense, lower price/mix and reduced volume.
Financial Position
Goodyear had cash and cash equivalents of $896 million as of Sep 30, 2018, down from $1.04 billion as of Dec 31, 2017. Long-term debt and capital leases amounted to $471 million as of Sep 30, 2018, up from $391 million as of Dec 31, 2017.
As of Sep 30, 2018, the company recorded total cash outflow of $24 million from operating activities in comparison with total outflow $154 million as of Sep 30, 2017. Also, capital expenditure for the period fell to $615 million from $683 million a year ago.
Capital Deployment
During the reported quarter, Goodyear repurchased 4.2 million shares for $100 million, under the previously announced $2.1-billion share buy-back program.
Since the program’s initiation in 2013, the company bought back 52 million shares for $1.5 billion.
Outlook
Goodyear revised its segment operating income expectations for 2018 to reflect the challenging industry environment. The company expects its segment operating income to exceed $1.3 billion, down from previous guidance of $1.45-$1.5 billion. The revised guidance reflects the impact of higher raw material costs due to headwinds from unfavorable currency translation, soft market conditions in China and economic volatility in Brazil.
Allison Transmission has an expected long-term growth rate of 10%. Over the past six months, shares of the company have risen 12.8%.
Advance Auto Parts has an expected long-term growth rate of 12.3%. Over the past six months, shares of the company have risen 40.3%.
AutoZone has an expected long-term growth rate of 12.2%. Over the past two years, shares of the company have risen 17.8%.
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Goodyear (GT) Q3 Earnings Miss Estimates, Deteriorate Y/Y
The Goodyear Tire & Rubber Company (GT - Free Report) reported adjusted earnings per share of 68 cents compared with 70 cents in the prior-year quarter. The bottom line missed the Zack Consensus Estimate of 76 cents. The company reported net income of $351 million, up from $129 million in the year-ago quarter.
The company delivered net revenues of $3.93 billion, slightly higher than $3.92 billion in the year-ago quarter. The top line was almost in line with the Zacks Consensus Estimate.
During the quarter, tire unit volumes were 40.5 million, up 2% from the year-ago quarter. Replacement tire shipments rose 4% while original equipment unit volume fell 4% from the prior-year quarter.
Segment operating income was $362 million, almost flat year over year.
The Goodyear Tire & Rubber Company Price, Consensus and EPS Surprise
The Goodyear Tire & Rubber Company Price, Consensus and EPS Surprise | The Goodyear Tire & Rubber Company Quote
Segment Details
Revenues in the Americas’ segment improved slightly year over year from $2.04 billion to $2.10 billion, which reflects increases in price/mix, increase volume and higher third-party chemical sales. Segment operating income came in at $194 million, nearly flat year over year. Modest decline was due to higher conversion costs, impact of reduced price/mix, unfavorable foreign currency translation and increased cost of raw material.
Revenues at the Europe, Middle East and Africa segment were $1.3 billion, down 2% year over year due to unfavorable foreign currency translation, partially offset by increased volume and favorable price/mix. The segment’s operating income increased 23% to $111 million. This was mainly driven by lower raw material costs, favorable price/mix, partially offset by unfavorable foreign currency translation and higher selling, administrative and general (SG&A) expenses.
Revenues at the Asia-Pacific segment declined 7% to $531 million, reflecting a drop in tire volumes and adverse foreign currency translation. The segment’s operating income declined to $57 million year over year due to higher SG&A expenses, partially because of higher bad debt expense, lower price/mix and reduced volume.
Financial Position
Goodyear had cash and cash equivalents of $896 million as of Sep 30, 2018, down from $1.04 billion as of Dec 31, 2017. Long-term debt and capital leases amounted to $471 million as of Sep 30, 2018, up from $391 million as of Dec 31, 2017.
As of Sep 30, 2018, the company recorded total cash outflow of $24 million from operating activities in comparison with total outflow $154 million as of Sep 30, 2017. Also, capital expenditure for the period fell to $615 million from $683 million a year ago.
Capital Deployment
During the reported quarter, Goodyear repurchased 4.2 million shares for $100 million, under the previously announced $2.1-billion share buy-back program.
Since the program’s initiation in 2013, the company bought back 52 million shares for $1.5 billion.
Outlook
Goodyear revised its segment operating income expectations for 2018 to reflect the challenging industry environment. The company expects its segment operating income to exceed $1.3 billion, down from previous guidance of $1.45-$1.5 billion. The revised guidance reflects the impact of higher raw material costs due to headwinds from unfavorable currency translation, soft market conditions in China and economic volatility in Brazil.
Zacks Rank & Stocks to Consider
Goodyear is a Zacks Rank#3 (Hold) company.
A few better-ranked stocks in the auto space are Allison Transmission Holdings, Inc. (ALSN - Free Report) , Advance Auto Parts, Inc. (AAP - Free Report) and AutoZone, Inc. (AZO - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Allison Transmission has an expected long-term growth rate of 10%. Over the past six months, shares of the company have risen 12.8%.
Advance Auto Parts has an expected long-term growth rate of 12.3%. Over the past six months, shares of the company have risen 40.3%.
AutoZone has an expected long-term growth rate of 12.2%. Over the past two years, shares of the company have risen 17.8%.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>