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Goodyear (GT) Q3 Earnings Beat Estimates, Down 39.3% Y/Y

The Goodyear Tire & Rubber Company GT reported 39.3% decrease in adjusted earnings per share to 71 cents in third-quarter 2017 from $1.17, recorded a year ago. However, the bottom line surpassed the Zacks Consensus Estimate of 67 cents. Adjusted net income declined to $177 million from $310 million in third-quarter 2016.

Revenues in the reported quarter were $3.92 billion, marginally ahead of the Zacks Consensus Estimate of $3.91 billion. The top line also comfortably rose from $3.85 billion, recorded a year ago.

Tire unit volumes were 39.8 million, down 5% from 2016. Replacement tire shipments fell 4%, while original equipment unit volume declined 9% year over year due to lower volume sales.

Segment operating income dropped to $357 million in the reported quarter from $556 million a year ago.

Segment Details

Revenues at the Americas’ segment slipped 1% year over year to $2 billion. Original equipment unit volume went down 11% year over year, primarily due to a decrease in auto production in the United States. Replacement tire shipments were down 6%, primarily due to increased competition and a weak industry demand.

Driven by raw material costs and the impact of lower volume, segment operating income plunged to $189 million from $305 million, a year ago.

Revenues from the Europe, Middle East and Africa segment were $1.3 billion, up 6% year over year. This upside is due to an improved price mix and a favorable foreign currency translation, partly offset by 4% decrease in tire sales volume. Original equipment unit volume was down 12%, while replacement tire shipments declined 1% year over year.

Segment operating income decreased to $87 million from $152 million, a year ago. This downside is primarily due to higher raw material costs and declining volume sales, partially offset by a better price mix and cost savings.

Revenues from the Asia-Pacific segment grew 5% to $569 million, reflecting an improved price mix. Original equipment unit volume slid 1%, while replacement tire shipments dipped 2% year over year. Segment operating income came down to $81 million from $99 million, a year ago. This decline is driven by continued high raw material costs, partly offset by an improved product mix.

Financial Position

Goodyear had cash and cash equivalents of $822 million as of Sep 30, 2017, down from $1.1 billion as of Dec 31, 2016. Long-term debt and capital leases amounted to $5.7 billion as of Sep 30, 2017, up from $4.8 billion as of Dec 31, 2016.

In the first nine months of fiscal 2017, the company recorded a total cash flow of ($154) million from operating activities, relecting a deterioration from $290 million, recorded in the same period last year. Also, capital expenditure for the same period decreased to $683 million from $711 million, recorded a year ago.

Capital Deployment

During the reported quarter, Goodyear repurchased 5.6 million shares for $175 million under the previously announced $2.1 billion share repurchase program.

On Sep 1, the board announced a quarterly dividend of 14 cents payable on Dec 1 to shareholders of record on Nov 1.


Goodyear anticipates operating income of approximately $1.5 billion for 2017, down from the previous guidance of $1.6-$1.65 billion.

Zacks Rank & Other Key Picks

Goodyear currently carries a Zacks Rank #2 (Buy).

Other top-ranked companies in the auto space include Daimler AG DDAIF, BorgWarner Inc. BWA and Lear Corporation LEA. All stocks also carry the same bullish Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Daimler has an expected long-term growth rate of 2.8%.

BorgWarner has an expected long-term growth rate of 8.9%.

Lear has an expected long-term growth rate of 7.1%.

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