The Goodyear Tire & Rubber Company
) is set to report second-quarter 2014 results on Jul 30. Last
quarter, it posted a -6.67% surprise. However, the tire
manufacturer managed to beat earnings by an average of +18.04% over
the last four quarters. Let us see how things are shaping up for
Factors Affecting the Past Quarter
Goodyear regularly launches innovative products to boost sales.
The company expects a 2-3% increase in unit volumes in 2014.
Moreover, the company is focusing on increasing its market share,
expanding in emerging markets and improving productivity over the
next three years to improve margins. Further, Goodyear is trying to
boost shareholders' value by capital deployment strategies.
However, the company is facing challenges in terms of volatile
political and economic environment and high currency fluctuations
in Latin America. The company's debt balance is also increasing.
Goodyear's long-term debt and capital leases increased to $7.1
billion as of Mar 31, 2014 from $6.2 billion as of Dec 31, 2013.
However, the company will be allocating $400 million for debt
reduction to improve its leverage metrics and help achieve an
investment grade credit rating.
Our proven model does not conclusively show that Goodyear is
likely to beat earnings this quarter. That is because a stock needs
to have both a positive
and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the
case here as you will see below.
Goodyear has an earnings ESP of +6.25%. That is because the Most
Accurate estimate is 85 cents and the Zacks Consensus Estimate is
80 cents per share.
Goodyear currently has a Zacks Rank #4 (Sell), which lowers the
predictive power of ESP. We caution against stocks with a Zacks
Rank #4 and 5 (Sell-rated stocks) going into the earnings
announcement, especially when the company is seeing negative
estimate revisions momentum.
Other Stocks to Consider
Here are some companies in the automobile sector you may want to
consider as our model shows these have the right combination of
elements to post an earnings beat this quarter:
Meritor, Inc. (
) has an earnings ESP of +26.67% and a Zacks Rank #1 (Strong Buy).
The company will report second-quarter earnings on Jul 31,
BorgWarner Inc. (
), with an earnings ESP of +1.15% and a Zacks Rank #2 (Buy), will
post second-quarter earnings on Jul 31, 2014.
American Axle & Manufacturing Holdings Inc. (
) has an earnings ESP of +8.45% and a Zacks Rank #2. The company
will release second-quarter financial results on Aug 1, 2014.
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