The Goodyear Tire & Rubber Company
AndrewSeptember 5, 2024Goodyear Tire & Rubber Company (Nasdaq: GT), established in 1898, might be an option for long-term investors due to its wide variety of products, innovative attitude, and good record of sustainable practices. To top this, Goodyear recently announced the Goodyear Forward transformation plan, which covers expansion and cost-cutting actions that will drive higher profitability. However, Goodyear might be described as having only moderately bright prospects, even in the absence of very favorable market conditions. The recent financial performances—good due to the positive net income in Q2 2024—communicate confidence in Goodyear's investment prospects.
Company Overview
Goodyear is among the largest tire manufacturing companies in the world. It operates in 23 countries with a total of 57 facilities. Altogether, it employs close to 72,000 employees. The types of tires produced include those for automobiles, aircraft, and industrial equipment. Famous brands under Goodyear include Goodyear, Cooper, Dunlop, and Kelly. Additionally, Goodyear produces chemical products and provides automotive services. Innovations are a priority, with research centers in Ohio and Luxembourg working on new technologies. This reach and expertise help Goodyear remain competitive within the automotive sector.
Insider Trading
In the past 12 months, Goodyear Tire & Rubber saw insider transactions totaling $1.55 million in purchases and $1.32 million in sales. Notably, the largest insider purchase occurred in August 2024, when John E. McGlade, a director, acquired 31,408 shares valued at $252,206. Over the past five years, insider sales significantly outweighed purchases, indicating mixed confidence among insiders.
Nasdaq: GT Insider trading summary over the past 12 months
Institutional Investor Purchases
Goodyear's institutional ownership remains robust, with top investors such as BlackRock and Vanguard Group holding over 23% of shares. In Q2 2024, Wellington Management notably increased its stake by 58%, reflecting strong institutional confidence in the company’s prospects.
Nasdaq: GT Institutional Investor Ownership Vs Market, Sector, Industry for Q1 2024
Outlook on Business
Goodyear appears to be recovering, as its Goodyear Forward plan generates revenue and simplifies its operations. The company posted sales of $4.6 billion in Q2 2024 and a net income of $85 million, a significant improvement compared to a $208 million loss the previous year. This success is partly due to the sale of non-core assets, such as the Off-the-Road business. Goodyear announced a $905 million divestment deal with Yokohama Rubber Company for its off-the-road tire business, which is expected to help reduce debt. Additionally, Goodyear has delivered improved profitability in recent quarters, with adjusted earnings of $0.19 per share reported for Q2 2024, a substantial improvement over last year's losses. The company has also implemented cost-cutting measures, achieving $162 million in savings under its Goodyear Forward plan.
Source: Nasdaq.com
New Project
Goodyear continues to launch innovative projects focused on sustainability and growth. The Goodyear Forward plan targets at least a 10% profit by 2025. The company remains committed to advancing tire recycling and retreading, which represent a promising revenue stream. Investments in smart tires and predictive analytics aim to help fleet operators monitor tire performance and reduce costs. The company's entry into the EV tire market reflects its intention to capitalize on the high volumes in that sector.
Company Valuation
Goodyear's financial statements reflect a company on the path to renewed success. Q2 2024 saw an operating income of $215 million, a significant improvement over the previous year's Q2. The company is working to reduce its debt to $9.5 billion as of June 2024, partly through de-leveraging and selling off non-core businesses. The Goodyear Forward plan aims to restore profitability through improved cost management and new pricing strategies. However, challenges remain, including low tire volumes and low inflation, though the company is addressing these issues with cost-cutting measures.
Analyst Views
Over the past few months, Goodyear has disappointed investors with a steep decrease in its share price, around 30%. Nevertheless, some investors are optimistic about the stock's long-term prospects. This optimism stems from Goodyear's efforts to reduce costs and improve profitability. However, weak industry trends, particularly in tire volumes and raw material inflation, are expected to continue to affect the stock in the near term. The outlook on the stock remains uncertain, with some analysts viewing it as a high-risk, high-reward investment, depending on market conditions and successful restructuring.
