Goodyear Tire Earnings Analysis: In Maintenance Mode?

Goodyear Tire Earnings Analysis: In Maintenance Mode?

The Goodyear Tire & Rubber Company reported its Q3 2013 results yesterday. The company is engaged in developing, manufacturing, distributing and selling tires and related products and services worldwide. Goodyear shares had gained .7% by market close today. Our earnings analysis for Goodyear suggests that the market expects faster growth from it than from most of its peers (see the end of this post for the peer list used for the analysis).

Get a Free Fundamental Analysis for Goodyear Tire

Download Now

Our earnings analysis for Goodyear is based on the company’s performance over the last twelve months (unless stated otherwise). The table below shows the preliminary results along with the recent trend forrevenues, net income and returns.

Mohnish Pabrai: 6.5x Return On Deep Value Turkish Stock [2020 Letter]

Mohnish PabraiIn his year-end letter to investors, Mohnish Pabrai, the Managing Partner of Pabrai Investment Funds, explained that 2020 had more impact on his way of thinking about the market than any other year since 1999. Q4 2020 hedge fund letters, conferences and more Following last year's lessons, Pabrai explained he has decided to move away Read More

Quarterly (USD million) 2013-09-30 2013-06-30 2013-03-31 2012-12-31 2012-09-30
Revenues 5,002.0 4,894.0 4,853.0 5,045.0 5,264.0
Revenue Growth % 2.2 0.8 (3.8) (4.2) 2.2
Net Income 173.0 188.0 33.0 7.0 117.0
Net Income Growth % (8.0) 469.7 371.4 (94.0) 27.2
Net Margin % 3.5 3.8 0.7 0.1 2.2
ROE % (Annualized) 207.5 576.9 N/A 0.0 74.8
ROA % (Annualized) 3.9 4.3 0.8 0.2 2.6

Faster Growth?

The Goodyear Tire & Rubber Company (NASDAQ:GT)’s current Price/Book of 11.3 is about average in its peer group. Goodyear achieved a better operating performance than the average of its chosen peers (ROE of 67.9% compared to the peer average ROE of 17.8%) and the market still expects faster growth from it than from those peers (PE of 16.0 compared to peer average of 11.8).

The company’s profit margins are below peer average (currently 2.0% vs. peer average of 6.1%) while its asset efficiency is about average (asset turns of 1.1x compared to peer average of 1.0x). Goodyear’s net margin is its highest relative to the last five years and compares to a low of -2.3% in 2009.

Strategic Play

While Goodyear’s revenues have increased more slowly than the peer average (8.8% vs. 12.1% respectively for the past three years), the market currently gives the company a higher than peer average PE ratio of 16.0. The stock price may be factoring in some sort of a strategic play.

Maintenance Mode

Goodyear’s annualized rate of change in capital of 1.3% over the past three years is less than its peer average of 4.6%. This below average investment level has also generated a less than peer average return on capital of 1.9% averaged over the same three years. This outcome suggests that the company has invested capital relatively poorly and now may be in maintenance mode.

Earnings Quality

Goodyear reported relatively weak net income margins for the last twelve months (2.0% vs. peer average of 6.1%). However, the company booked a level of accruals that is around peer average (3.4% vs. peer average of 3.7%) for the same period, suggesting that its reported net income is supported by a reasonable level of accruals.

Goodyear’s accruals over the last twelve months are positive suggesting a buildup of reserves. However, this level of accruals is also around the peer average and suggests the company is recording a proper level of reserves compared to its peers.

Trend Charts for Goodyear Tire & Rubber Company

Goodyear Tire & Rubber  Company (NASDAQ:GT) Revenues TrendGoodyear Tire & Rubber  Company (NASDAQ:GT) Net Margin TrendGoodyear Tire & Rubber Company (NASDAQ:GT) Accruals Trend

Peers for Goodyear Tire & Rubber Company

We used the following peer-set for our analysis: Continental AG Sponsored ADR (OTC BB:CTTAY), Bridgestone Corp Unsponsored ADR (OTC BB:BRDCY), Compagnie Generale des Etablissements Michelin SCA (EURONEXT PARIS:ML), Nokian Renkaat Oyj Unsponsored ADR (OMX NORDIC HELSINKI:NRE1V), Hankook Tire Worldwide Co., Ltd (KOREA:161390), Cooper Tire & Rubber Company (NYSE:CTB) and Toyo Tire & Rubber Co., Ltd. (TOKYO:5105).

Get a Free Fundamental Analysis for Goodyear Tire

Download Now


No posts to display