Why Is Goodyear (GT) Down 24.4% Since Last Earnings Report?

A month has gone by since the last earnings report for Goodyear (GT). Shares have lost about 24.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Goodyear due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Goodyear Earnings Miss Estimate in Q2, Decline Y/Y

Goodyear has reported adjusted earnings per share of 25 cents in second-quarter 2019 compared with 62 cents in the prior-year quarter. Further, its earnings missed the Zack Consensus Estimate of 31 cents. It reported net income of $54 million, down from the net income of $157 million in the year-ago quarter.

The company delivered net revenues of $3.63 billion, lower than $3.84 billion in the year-ago quarter. Also, its revenues missed the Zacks Consensus Estimate of $3.66 billion. The year-over-year decline in revenues was due to currency fluctuations as well as lower volume and sales from other tire-related businesses. These were partly offset by improvements in price/mix.

In the reported quarter, tire volume was 37.4 million units, down 4% from the year-ago quarter. Replacement tire shipments declined less than 1% from the year-ago quarter.

Segment operating income was $219 million, down from $324 million a year ago.

Segments in Detail

Revenues in the Americas segment declined year over year from $2.01 billion to $1.97 billion. The segment’s operating income was $134 million, down from $154 million in second-quarter 2018.

Revenues at the Europe, Middle East and Africa segment were $1.14 billion, down 9% year over year. The segment’s operating income decreased 56% to $44 million.

Revenues at the Asia Pacific segment declined 8% to $520 million. The segment’s operating income declined year over year to $41 million from $70 million.

Financial Position

Goodyear had cash and cash equivalents of $917 million as of Jun 30, 2019, up from $801 million as of Dec 31, 2018. As of Jun 30, 2019, long-term debt and finance leases amounted to $5.77 billion, up from $5.11 billion as of Dec 31, 2018.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -8.73% due to these changes.

VGM Scores

At this time, Goodyear has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Goodyear has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.

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