The Goodyear Tire & Rubber Company GT reported adjusted earnings per share of 62 cents, down from 70 cents in the prior-year quarter. The bottom line surpassed the Zack Consensus Estimate of 56 cents. The company reported net income of $157 million, up from $147 million in the year-ago quarter.
The company delivered net revenues of $3.84 billion, higher than $3.70 billion in the year-ago quarter. However, the figure missed the Zacks Consensus Estimate of $3.9 billion.
During the quarter, tire unit volumes were 39 million, up 4% from the year-ago quarter’s figure. Replacement tire shipments rose 5% and original equipment unit volume rose 3% from the prior-year quarter’s tally.
Segment operating income dropped to $324 million in the reported quarter from $369 million a year ago.
The Goodyear Tire & Rubber Company Price, Consensus and EPS Surprise
The Goodyear Tire & Rubber Company Price, Consensus and EPS Surprise | The Goodyear Tire & Rubber Company Quote
Segment Details
Revenues in the Americas’ segment declined slightly year over year from $2.03 billion to $2.02 billion, which reflects a reduced price/mix and unfavorable foreign currency translation. Segment operating income plunged 29% to $154 million, due to higher raw material costs and lower price/mix.
Revenues in the Europe, Middle East and Africa segment were $1.3 billion, up 13% year over year. The upside was mainly driven by increased volume. The segment’s operating income increased 25% to $100 million. This was mainly driven by favorable price/mix, increased sales volume, partly offset by higher raw material costs.
Revenues from the Asia-Pacific segment rose 4% to $563 million, reflecting an improved price/mix and higher tire volumes.
The segment’s operating income declined to $70 million year over year, due to a lower price/mix, which more than offset gains from higher volume.
Financial Position
Goodyear had cash and cash equivalents of $975 million as of Jun 30, 2018, down from $1.04 billion as of Dec 31, 2017. Long-term debt and capital leases amounted to $5.7 billion as of Jun 30, 2018, up from $5.08 billion as of Dec 31, 2017.
As of Jun 30, 2018, the company recorded total cash outflow of $84 million from operating activities in comparison with total outflow $185 million as of Jun 30, 2017. Also, capital expenditure for the period fell to $442 million from $497 million a year ago.
Capital Deployment
During the reported quarter, Goodyear repurchased 3 million shares for $75 million, under the previously announced $2.1 billion share repurchase program.
Since the program’s initiation in 2013, the company repurchased 48 million shares for $1.4 billion.
Outlook
Goodyear lowered its 2018 segment operating income guidance to the range of $1.45-$1.5 billion (down from $1.8-$1.9 billion expected earlier). The revised guidance reflects a $70 million headwind due to soft market conditions in China, a $130 million increase in raw material costs and unfavorable foreign currency swing of $60 million.
Zacks Rank & Key Picks
Goodyear carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the auto space are Oshkosh Corp. OSK, AB Volvo VLVLY and Fox Factory Holding Corp. FOXF, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Oshkosh has an expected long-term growth rate of 18.3%. Over the past year, shares of the company have moved up 7.3%.
AB Volvo has an expected long-term growth rate of 15%. Over the past year, shares of the company have gained 2.3%.
Fox Factory has an expected long-term growth rate of 15.8%. Shares of the company have risen 30.2% over the past year.
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