Goodyear Tire Beats on Earnings, Misses Revs - Analyst Blog

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The Goodyear Tire & Rubber Company ( GT ) reported a 89.7% rise in earnings per share to 74 cents in the fourth quarter of 2013  from 39 cents a year ago (all excluding special items). The reported earnings beat the Zacks Consensus Estimate of 63 cents. Net income escalated to $202 million from $97 million in the fourth quarter of 2012.

Including special items, the company reported a profit of $228 million or 84 cents per share in the quarter, up from a breakeven a year ago.

Revenues in the quarter fell 5% year over year to $4.8 billion, missing the Zacks Consensus Estimate of $5.02 billion. The drop in revenues can be attributed to a $178 million impact of lower sales in other tire related businesses, specifically due to a decline in third-party chemical sales in North America.

In addition, revenues include the negative impact of $36 million from lower price/mix due to lower raw material costs and $102 million in unfavorable foreign currency translation. These were partially offset by a $64 million increase in tire unit volumes.

Operating income improved 54% to $419 million in the fourth quarter of 2013. The improvement was driven by favorable price/mix and lower unabsorbed overhead due to higher production and increased tire unit volumes. These were partially offset by adverse impacts of foreign currency translation and higher SAG expenses.

Fiscal 2013 Performance

Goodyear Tire's earnings increased significantly to $2.28 per share for full-year 2013 from 74 cents in 2012, missing the Zacks Consensus Estimate of $2.51. Revenues for full-year 2013 decreased 7% to $19.5 billion from $21 billion in 2012, missing the Zacks Consensus Estimate of $19.8 billion.

Segment Details

Revenues from the North American segment dipped 8% year over year to $2.1 billion. The decline in revenues includes a negative impact of $170 million from lower sales in other tire related businesses, specifically a drop in third-party chemical sales and lower price/mix. These were partially offset by a 3% hike in tire unit volumes, 7% in original equipment unit volume and 1% in replacement tire shipments.

Revenues from the Europe, Middle East and Africa segment increased 2% to $1.63 billion. Revenues benefited from increased tire unit sales and favorable foreign currency translation, which was partially offset by lower price/mix.

Sales in Latin America fell 9.1% to $492 million due to unfavorable foreign currency translation and a fall in tire unit volumes. Revenues benefited from improved price/mix.

Revenues at the Asia-Pacific segment fell 8.7% to $537 million due to lower price/mix, reduced sales in other tire-related businesses and unfavorable foreign currency translation.

Financial Position

Goodyear had cash and cash equivalents of $3 billion as of Dec 31, 2013, up from $2.3 billion as of Dec 31, 2012. Long-term debt and capital leases amounted to $6.2 billion as of Dec 31, 2013, against $5.0 billion as of Dec 31, 2012.

Cash flow from operations in 2013 dropped to $938 million from $1.04 billion in 2012. Capital expenditure stood at $1.2 billion compared with $1.1 billion in the same period a year ago.

Guidance

For the period 2014 -2016, Goodyear expects annual segment operating income to increase 10-15%. Moreover, the company expects a 2-3% increase in unit volumes in 2014 from 2013.

Goodyear Tire & Rubber Company is one of the largest tire manufacturing companies worldwide. The company currently retains a Zacks Rank #3 (Hold).

Other stocks that are performing well include STRATTEC Security Corp. ( STRT ), Gentex Corp. ( GNTX ) and Allison Transmission Holdings, Inc. ( ALSN ). All the companies carry a Zacks Rank #1 (Strong Buy).



ALLISON TRANSMN (ALSN): Free Stock Analysis Report

GENTEX CORP (GNTX): Free Stock Analysis Report

GOODYEAR TIRE (GT): Free Stock Analysis Report

STRATTEC SEC CP (STRT): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: ALSN , GNTX , GT , STRT

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