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Goodyear (GT) to Report Q1 Earnings: A Surprise in Store?

The Goodyear Tire & Rubber Company GT is set to report first-quarter 2016 results on Apr 27. In the last quarter, this tire manufacturer had posted a positive earnings surprise of 25.68%. Let us see how things are shaping up for this announcement.

Factors Influencing this Quarter

Goodyear regularly launches innovative products and services to boost sales. The company is benefiting from lower raw material costs, strong economic trends in North America and continued cost savings. Further, Goodyear has been redeeming some of its outstanding senior notes using the proceeds from the offering of new senior notes with lower interest rate. These transactions will reduce the interest expense of the company.

In Jun 2015, Goodyear signed an agreement to dissolve the global alliance with Sumitomo Rubber Industries, Ltd. The deal is expected to be accretive to its earnings from the first quarter of 2016 due to the removal of Sumitomo Rubber’s minority interest in Goodyear Dunlop Tires Europe B.V.

Goodyear attained record-high segment operating income in 2013, 2014 and 2015. However, the company’s revenue has been declining over the years due to unfavorable foreign currency translation, lower sales in other tire-related businesses, and a decline in price and product mix. These trends are expected to continue this year as well.

In Latin America, Goodyear is facing challenges in terms of a volatile political and economic environment, lower production volume in Venezuela and Brazil, and high currency fluctuations.

Earnings Whispers

Our proven model does not conclusively show that Goodyear is likely to beat earnings this quarter. This is because a stock needs to have both a positive http://www.zacks.com/earnings/earnings-surprise-predictions/">Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: The Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. Goodyear has an Earnings ESP of 0.00% because the Most Accurate estimate and the Zacks Consensus Estimate are both pegged at 70 cents.

Zacks Rank: Goodyear’s Zacks Rank #2 (Buy) increases the predictive power of ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Lear Corp. LEA has an Earnings ESP of +2.12% and a Zacks Rank #1 (Strong Buy). The company is expected to report first-quarter 2016 results on Apr 27.

Ford Motor Co. F has an Earnings ESP of +11.63% and a Zacks Rank #3 (Hold). The company will report first-quarter 2016 financial numbers on Apr 28.

Axle & Manufacturing Holdings Inc. AXL has an Earnings ESP of +7.04% and a Zacks Rank #3. The company’s first-quarter 2016 financial results are scheduled for release on May 6.

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FORD MOTOR CO (F): Free Stock Analysis Report
 
AMER AXLE & MFG (AXL): Free Stock Analysis Report
 
LEAR CORPORATN (LEA): Free Stock Analysis Report
 
GOODYEAR TIRE (GT): Free Stock Analysis Report
 
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