1:28 PM, Oct 25, 2019 — Goodyear Tire & Rubber (GT) shares popped Friday even after the tire company reported third-quarter results that missed expectations.
Sales at Akron, Ohio-based Goodyear fell to $3.8 billion in the quarter ended Sept. 30 from $3.93 billion in the prior-year quarter and below the consensus compiled by Capital IQ for $3.92 billion. Adjusted per-share earnings fell to $0.45 from $0.68 last year, missing the Street’s view for $0.52.
Goodyear shares were up 9% in afternoon trading.
CFRA still raised its 12-month price target on the stock by $3 to $18. “While GT’s Q3 results missed, we think investor expectations were low given its recent earnings track record (four misses in the past five quarters), so we think investors will take the miss in stride,” the investment firm said. “More importantly, GT should have significantly easier comps ahead and lower oil prices should help support margins.”
Chief Executive Richard Kramer said in the Americas the company saw “continued strength in our US consumer replacement business and solid growth in Brazil, giving us positive momentum in these important markets as we head into the final months of the year.”
The business in the Asia Pacific region “improved in the quarter as we benefited from the launch of several OE fitments in China, which helped mitigate the impact of lower auto production,” Kramer said.
Goodyear said sales in the Americas slid 3% from last year to $2.05 billion as tire unit rose 1%. Replacement tire shipments rose 3%, led higher the US and Brazil. Original equipment unit volume fell 7%, dragged lower by lower vehicle production in the US due to the labor strike at General Motors (GM).
Europe, Middle East and Africa sales fell 7% to $1.21 billion, largely due to foreign exchange headwinds. Tire unit volume slid 6% while replacement tire shipments fell 5% on decreased industry demand and distribution challenges. Original equipment volume fell 9% on lower vehicle production.
Kramer said business conditions in Europe were weaker than the company expected on “an adverse impact from lack of alignment in our distribution channels.” Goodyear will speed up its plans to “rationalize distribution in the region” early next year,” he said.
Kramer said the moves “should improve the focus on our brands and ensure that we capture the full benefits of the investments we are making to increase the supply of premium, high-margin tires over the next few years.”
Sales in the Asia Pacific region rose 3% to $548 million as tire unit volume increased 5%, driven higher growth in China. Replacement tire shipments rose 7%, and original equipment volume gained 2%.
Price: 16.51 Price Change: +1.37 Percent Change: +9.02