Goodyear (GT) Down 25.2% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Goodyear (GT). Shares have lost about 25.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Goodyear due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Goodyear Q1 Earnings Surpass Estimates, Decrease Y/Y

Goodyear has reported adjusted earnings per share of 19 cents in first-quarter 2019 compared with 50 cents in the prior-year quarter. The bottom line surpassed the Zack Consensus Estimate of 5 cents. It reported net loss of $44 million against net income of $80 million in the year-ago quarter.

The company delivered net revenues of $3.60 billion, lower than $3.83 billion in the year-ago quarter. Also, the top line beat the Zacks Consensus Estimate of $3.54 billion. The year-over-year decline in revenues was due to currency fluctuations as well as lower volume in international businesses. These effects were partly offset by improvements in price/mix.

During the reported quarter, tire unit volume was 38 million, down3% from the year-ago quarter. Replacement tire shipments were down less than 1% compared with the year-ago quarter.

Segment operating income was $89 million, down 30% year over year.

Segment Details

Revenues in the Americas’ segment declined year over year from $1.93 billion to $1.88 billion. The segment’s operating income was $89 million, down from $127 million in first-quarter 2018.

Revenues at the Europe, Middle East and Africa segment were $1.22 billion, down 8% year over year. The segment’s operating income decreased 31% to $54 million.

Revenues at the Asia Pacific segment declined 12% to $501 million. The segment’s operating income declined year over year to $47 million from $76 million.

Financial Position

Goodyear had cash and cash equivalents of $860 million as of Mar 31, 2019, up from $801 million as of Dec 31, 2018.As of Mar 31, 2019, long-term debt and finance leases amounted to $5.55billion, up from $4.78 billion as of Dec 31, 2018.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -17.88% due to these changes.

VGM Scores

At this time, Goodyear has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Goodyear has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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