A month has gone by since the last earnings report for Goodyear (GT). Shares have added about 1.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Goodyear due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Goodyear Posts Q2 Loss, Sales Top Estimates
Goodyear Tire reported second-quarter 2020 adjusted loss per share of $1.87, narrower than the Zacks Consensus Estimate of a loss of $2.10. Higher-than-expected net sales of tires in America led to lower-than expected loss. Precisely, net sales in America were $1,134 million, surpassing the consensus mark of $798 million.
The bottom line deteriorated from earnings per share of 25 cents recorded in the prior-year quarter due to lower revenues across all segments. Lower industry volume and reduced sales amid the coronavirus pandemic weighed on the firm’s results.
It delivered net revenues of $2,144 million, lower than $3,632 million reported in the year-ago quarter. However, revenues surpassed the Zacks Consensus Estimate of $1,786 million.
For the reported quarter, tire volume was 20.4 million units, down 45% from the year-ago period. Original equipment unit volume decreased 62% due to reduced vehicle production amid factory shutdowns and replacement tire shipments declined 39% from the year-ago quarter owing to lower consumer demand and temporary store closures amid the coronavirus pandemic.
The Americas segment generated revenues of $1,134 million, which compared unfavorably with $1,971 million in the prior-year period. The segment incurred an operating loss of $287 million against income of $134 million in second-quarter 2019. The year-over-year decline was due to reduced volume and weak factory utilization.
Revenues in the Europe, Middle East and Africa segment were $676 million, down from $1,141 million a year ago. The segment’s operating loss was $110 million against operating income of $44 million recorded in the year-ago quarter.
Revenues in the Asia Pacific segment fell 36% year over year to $334 million. The segment incurred operating loss of $34 million for the quarter under review against income of $41 million in the corresponding period of 2019.
Goodyear Tire completed a phased restart of manufacturing facilities in the second quarter. Goodyear had cash and cash equivalents of $1,006 million as of June 2020, up from $908 million as of Dec 31, 2019. As of Mar 31, 2020, long-term debt and finance leases amounted to $5,688 million, up from $4,753 million on Dec 31, 2019.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -420% due to these changes.
At this time, Goodyear has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Goodyear has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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