Shares of Goodyear Tire & Rubber Co. (NASDAQ: GT) fell 16.5% in August, according to data provided by S&P Global Market Intelligence, continuing the company's miserable stock performance in 2019. Goodyear, like many auto companies and their suppliers, is under pressure due to fears of a slowing U.S. economy and the ongoing trade war with China.
Goodyear's 16% drop in August followed a 10% decline in July and put the stock down more than 35% for the year, dramatically underperforming the S&P 500's 18% gain for the year. In July, Goodyear management called the operating environment "challenging," and those challenges show no sign of letting up.
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The company has come under pressure due to the ongoing threats of trade wars against Mexico and China, persistent fears of an automotive slowdown, and concerns about the health of the U.S. consumer. In August, the China rhetoric flared, and the U.S. yield curve flashed a warning signal of a potential recession, giving investors ample reason to head for the exit.
Goodyear is trying to adjust to the current climate. The company said in July that it was planning a "significant" restructuring on top of previously announced steps including consolidating German production. Those moves should help Goodyear over the long run, but they offer very little near-term relief should sales continue to feel the pinch.
Goodyear shares are off to a great start so far in September and have largely made up what was lost in August. The mood in the market has brightened slightly as well, and while the China trade issue is unresolved, the current headlines -- for now -- are dominated with talks of meetings and not threats of further tariffs.
Goodyear shares, priced at just 6.8 times earnings, are affordable, and the company offers a 5% dividend yield. But investors should think carefully before deeming Goodyear an attractive value stock. The downside to buying in at these levels appears limited, but the upside is going to take time to materialize.
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