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Goodyear (GT) Earnings Miss Estimate in Q3, Decline Y/Y

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The Goodyear Tire & Rubber Company (GT - Free Report) reported adjusted earnings per share of 45 cents in third-quarter 2019 compared with 68 cents recorded in the prior-year quarter. Further, its earnings missed the Zack Consensus Estimate of 50 cents. The underperformance stemmed from unfavourable foreign-currency translation and lower third-party chemical sales. The company reported net income of $105 million, down from the year-ago quarter’s $163 million.

The company delivered net revenues of $3.8 billion, lower than $3.93 billion reported in the year-ago quarter. Also, its revenue figure missed the Zacks Consensus Estimate of $3.87 billion.

In the reported quarter, tire volume was 40.3 million units, down 1% from the year-ago quarter. Original equipment unit volume decreased 5%, due to lower global vehicle production, while replacement tire shipments increased 1% from the year-ago quarter.

Segment operating income was $294 million, down from the year-ago quarter’s $362 million. The year-over-year downside resulted from elevated raw-material costs as well as lower volume and the non-recurrence of a favorable indirect tax settlement in Brazil. These were partly offset by improvements in price/mix.

Segments in Detail

Revenues in the Americas segment declined year over year from $2.1 billion to $2.05 billion. The segment’s operating income was $175 million, down from $194 million recorded in third-quarter 2018. The year over year decline was driven by lower vehicle production and weaker third-party chemical sales.

Revenues in the Europe, Middle East and Africa segment were $1.2 billion, down 6.59% year over year. The segment’s operating income plunged 40.5% to $66 million. Lower volumes and factory utilization along with unfavourable currency translations and distribution challenges resulted in the weak performance.

Revenues in the Asia-Pacific segment increased 3.2% to $548 million on the back of higher volume and favourable product mix. The segment’s operating income declined year over year to $53 million from $57 million amid lower factory utilization and unfavourable forex transactions.

Dividend & Financial Position

The firm declared a quarterly dividend of 16 cents a share, payable on Dec. 2, 2019 to shareholders of record on Nov. 1, 2019

Goodyear had cash and cash equivalents of $868 million as of Sep 30, 2019, up from $801 million as of Dec 31, 2018. As of Sep 30, 2019, long-term debt and finance leases amounted to $5.58 billion, up from $5.11 billion as of Dec 31, 2018. The debt-to-capital ratio stands at 52.4%.

Zacks Rank & Stocks to Consider

Currently, Goodyear carries a Zacks Rank#3 (Hold).

A few better-ranked stocks worth considering are BRP Inc. DOOO and Aaron's, Inc. AAN, both sporting a Zacks Rank #1 (Strong Buy), and Douglas Dynamics, Inc. PLOW carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BRP has an expected earnings growth rate of 18.49% for 2019. The company’s shares have rallied 13.1% in the past year.

Aaron's has an estimated earnings growth rate of 17.56% for the ongoing year. The company’s shares have surged roughly 73.1% in a year’s time.

Douglas Dynamics has a projected earnings growth rate of 11.76% for the current year. Its shares have gained around 7.4% over the past year.

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