The Goodyear Tire & Rubber Company GT is poised to benefit from the buyout of Cooper Tire, Goodyear Forward plan and EMEA restructuring despite inflationary headwinds.
Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
Cooper Tire Buyout, Goodyear Forward to Aid Performance
Cooper Tire Buyout Serves as a Key Catalyst: The acquisition of Cooper Tire has strengthened Goodyear’s leadership position in the U.S. tire industry and expanded its foothold in other North American markets. The complementary product offerings, scale expansion and value addition from both production and distribution standpoints are boosting the firm’s top line.
Goodyear Forward Transformation Plan: Goodyear’s transformative initiative, dubbed Goodyear Forward, bodes well. The plan, designed to optimize the company’s portfolio, enhance margins and reduce leverage, aims to unlock significant value for shareholders. With a goal to raise more than $2 billion from portfolio optimization, Goodyear is actively exploring strategic alternatives for its chemical, Dunlop and off-the-road equipment tire businesses. The company expects savings of $350 million in 2024 from the Goodyear Forward program. By the end of 2025, it expects the program to deliver annualized cost reductions of $1 billion. Positioned for substantial growth, GT targets a doubled operating margin, moving from nearly 5% in 2023 to 10% by the end of 2025, aligning with debt reduction goals and a stronger financial profile.
Strategic EMEA Restructuring: Goodyear’s strategic restructuring in the EMEA segment is likely to reap benefits. The company’s focus on operational efficiency through streamlining product business units, centralizing functions and optimizing shared services is poised to enhance competitiveness and foster growth. The streamlining actions are expected to result in savings of $100 million by 2025 from the 2022 baseline.
Electrification Strides: Encouragingly, GT remains focused on developing tires that will help it transform its portfolio to include more energy-efficient and eco-friendly vehicles. The company regularly rolls out innovative products and services to boost sales and remain competitive in the market. The launch of Goodyear ElectricDrive GT, a best-in-class fit-for-purpose tire, especially for EVs, is set to buoy prospects. Collaborations with companies like Plus, AutoFleet, Formant, ZF and Gatik demonstrate Goodyear’s efforts to cater to the changing dynamics of the auto industry.
AndGo and Goodyear Ventures in Focus: While the capital venture fund — Goodyear Ventures — intends to advance future mobility solutions over the next decade, AndGo is designed to be a seamless vehicle servicing platform that integrates predictive software with a trusted service network. The addition of TuSimple, a global autonomous trucking technology company, to Goodyear Ventures, augurs well. Goodyear Ventures also partnered with AmpUp to help GT provide consumers and fleets with solutions that unlock the full potential of EVs.
Inflation, Weak Commercial Truck Business Ail
While global inflation is showing signs of gradual decline, it remains above pre-pandemic levels. The company expects non-raw material inflation and other costs to be $10 million higher in the second quarter of 2024 compared with the year-ago period. In the commercial truck business, weak fleet industry conditions have affected the company’s performance in both the Americas and EMEA. In first-quarter 2024, sales totaled $4.5 billion, down 8% from last year due to industry weakness. This ongoing challenge will likely affect the company’s top-line growth.
The Goodyear Tire & Rubber Company Price and Consensus
The Goodyear Tire & Rubber Company price-consensus-chart | The Goodyear Tire & Rubber Company Quote
Stocks to Consider
Some better-ranked stocks in the auto space are Blue Bird Corporation BLBD and Oshkosh Corporation OSK, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for BLBD’s 2024 sales and earnings suggests year-over-year growth of 17.29% and 155.14%, respectively. The EPS estimates for 2024 and 2025 have improved 63 cents and 69 cents, respectively, in the past 30 days.
The Zacks Consensus Estimate for OSK’s 2024 sales and earnings suggests year-over-year growth of 9.86% and 10.72%, respectively. The EPS estimates for 2024 and 2025 have improved 16 cents and 14 cents, respectively, in the past 30 days.
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