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Goodyear (GT) Q4 Earnings & Revenues Beat Estimates, Up Y/Y

Zacks

The Goodyear Tire & Rubber Company GT reported adjusted earnings per share of 99 cents in comparison to 95 cents in the prior-year quarter. Moreover, the bottom line surpassed the Zack Consensus Estimate of 76 cents. The company reported net loss of $96 million against net income of $561 million in fourth-quarter 2016.

Revenues in the quarter under review were $4.07 billion, beating the Zacks Consensus Estimate of $3.91 billion. The top line also comfortably rose from $3.74 billion a year ago.

During the quarter under concern, tire unit volumes were 42 million, up 2% from fourth-quarter 2016. Replacement tire shipments rose 3% while original equipment unit volume slipped 1% in comparison to the year-earlier quarter.

The Goodyear Tire & Rubber Company Price, Consensus and EPS Surprise


Segment operating income dropped to $419 million in the reported quarter from $479 million a year ago.

Fiscal 2017 Results

Goodyear reported earnings of $1.37 per share in fiscal 2017, down from $4.74 earned in fiscal 2016. The Zacks Consensus Estimate for the metric was $2.89.

Net income decreased to $346 million from $1.3 billion a year ago. Further, sales rose to $15.4 billion from $15.2 billion in fiscal 2016. Moreover, the top line surpassed the Zacks Consensus Estimate of $15.3 billion.

Segment Details

Revenues at the Americas’ segment gained 6% year over year to $2.2 billion, reflecting a 4% rise in tire unit volume and favorable price mix. Original equipment unit volume was flat in comparison to the prior-year quarter. Replacement tire shipments were up 5%, primarily driven by a rise of 8% in the United States consumer replacement.

Driven by higher raw material costs and increased costs due to lesser production, segment operating income plunged to $209 million from $295 million a year ago.

Revenues from the Europe, Middle East and Africa segment were $1.3 billion, up 12% year over year. This upside is driven by an improved price mix and a favorable foreign currency translation. Original equipment unit volume was down 12% while replacement tire shipments gained 2% year over year.

Segment operating income increased to $93 million from $81 million a year ago. This upside is primarily on the back of improved price mix and cost saving initiatives, partly offset by soaring raw material costs.

Revenues from the Asia-Pacific segment grew 14% to $623 million, reflecting an improved price mix. Original equipment unit volume gained 12% while replacement tire shipments were flat year over year. Segment operating income rose to $117 million from $103 million a year ago. This rise is driven by an improved product mix, partly offset by high raw material costs.

Financial Position

Goodyear had cash and cash equivalents of $1.04 billion as of Dec 31, 2017, down from $1.13 billion as of Dec 31, 2016. Long-term debt and capital leases amounted to $5.1 billion as of Dec 31, 2017, up from $4.8 billion as of Dec 31, 2016.

At the fiscal 2017-end, the company recorded a total cash flow of $1.2 billion from operating activities in comparison to $1.6 billion, recorded at the end of comparable quarter last year. Also, capital expenditure for the period decreased to $881 million from $996 million a year ago.

Capital Deployment

During the reported quarter, Goodyear repurchased 6.3 million shares for $195 million under the previously announced $2.1 billion share repurchase program.

Since the company’s share repurchase program inception in 2013, Goodyear repurchased total of 44 million shares for $1.3 billion.

Outlook

Goodyear anticipates operating income within the band of $1.8-$1.9 billion, approximately, for 2018.

The company has also updated its 2020 segment operating income target and capital allocation plan. It expects to achieve a target of $2-$2.4 billion in 2020 in the segment operating income. While the capital allocation plan includes restructuring, growth capital, debt and pension payments plus a shareholder return program.

Zacks Rank & Key Picks

Goodyear carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the auto space are Peugeot SA PUGOY, Lear Corporation LEA and Genuine Parts Company GPC, each with a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Peugeot has an expected long-term growth rate of 16.6%. Shares of the company have gained 4.5% in the last 30 days.

Lear Corp has an expected long-term growth rate of 7.1%. The stock has jumped 29.1% in the last six months.

Genuine Parts has an expected long-term growth rate of 7.2%. In the last six months, shares of the company have rallied 18.9%.

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