Goodyear Tire Crashes 27% Despite Solid Q4 Beat

One of the world’s largest tire manufacturers, Goodyear Tire & Rubber Company (GT) reported better-than-expected fourth-quarter and full-year fiscal 2021 results.

The quarter marked its highest revenue in nearly 10 years, driven by robust demand for its offerings coupled with increased selling prices. The quarter also saw a contribution from the Cooper Tire business, which was merged into GT on June 7, 2021.

However, shares crashed 27.4% to close at $15.78 on February 11, after the company cautioned of persistent inflationary pressures for several upcoming quarters.

Better-Than-Expected Results

GT’s Q4 adjusted earnings came in at $0.57 per share, increasing 29.5% year-over-year and much higher than analyst estimates of $0.32 per share.

Similarly, quarterly net sales leaped 38% year-over-year to $5.05 billion and also came in better than Street estimates of $4.96 billion.

For the full year fiscal 2021, Goodyear Tire reported adjusted earnings of $2.09 per share, compared to an adjusted loss of $1.91 per share reported in FY20.

Additionally, GT’s net sales for FY21 advanced 42% to $17.48 billion, primarily from a $2.1 billion revenue contribution from Cooper Tire, improved volumes, and price/mix as well as demand momentum.

Official Comments

The Chairman, CEO, and President of Goodyear Tire, Richard J. Kramer, said, “Looking ahead, we expect inflationary pressures to persist over the next several quarters. We remain focused on executing strategies to capture value in the marketplace and managing our costs.”

Commenting on the Cooper Tire merger, Kramer said, “We are pleased with the pace of our integration of Cooper Tire and we continue to make solid progress toward the increased synergy targets we shared in November… I am confident we have positioned our business to deliver strong sales and earnings growth over the long term.”

Consensus View

Responding to Goodyear Tire’s quarterly performance, Northcoast Research analyst John Healy reiterated his Buy rating on the stock, mentioning that the current inflationary headwinds were only a temporary hurdle for the company.

With 2 Buys and 1 Holds, the GT stock has a Moderate Buy consensus rating. At the time of writing, the average Goodyear Tire price target was $28, which implies a whopping 77.5% upside potential to current levels.  

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