On Apr 14, we downgraded Goodyear Tire & Rubber
Company ( GT
), one of the world's largest tire manufacturers, to Underperform
based on the company's lower revenues in the fourth quarter of 2012
and reduced operating income guidance for 2013.DENSO CORP (DNZOY): Get Free ReportGOODYEAR TIRE (GT): Free Stock Analysis ReportGENTHERM INC (THRM): Free Stock Analysis ReportVISTEON CORP (VC): Free Stock Analysis ReportTo read this article on Zacks.com click here.
Why the Downgrade?
On Feb 12, Goodyear reported a profit of $97 million or 39 cents
per share in the fourth quarter of 2012 that significantly rose
from $6 million or 3 cents in the same quarter of 2011 (all
excluding special items). With this, the company has beaten the
Zacks Consensus Estimate of 21 cents per share.
However, revenues fell 11.2% to $5.0 billion owing to $338 million
in lower tire unit volumes, $221 million lower sales in other tire
related businesses, mainly third-party chemical sales in North
America, and $85 million loss in unfavorable foreign currency
translation. It was also lower than the Zacks Consensus Estimate of
$5.4 billion. Tire unit volumes declined 7% to 40 million,
primarily due to lower volumes in Europe.
Following the release of the fourth quarter results, the Zacks
Consensus Estimate for 2013 decreased 6% to $2.05 per share. The
Zacks Consensus Estimate for 2014 dropped 3.4% to $2.52 per share.
Currently, Goodyear retains a Zacks Rank #4 (Sell).
Owing to the sluggish industry demand, Goodyear faces increasing
pricing pressure from OEMs. This will adversely affect the profit
margins of the company as it sells nearly 30% of its tires to
Goodyear lowered its operating income margin to $1.4 billion-$1.5
billion for 2013 compared with the prior outlook of $1.6 billion.
The downward revision was due to weaknesses in European market
together with related production cuts.
Other Stocks to Consider
Some other stocks that are performing well in the industry where
Goodyear operates include Gentherm Incorporated (
Visteon Corp. ( VC ) and Denso
Corp. ( DNZOY ). All these
companies carry a Zacks Rank #1 (Strong Buy).