Goodyear to Post Earnings of $0.14 in Q221; Target Price $21

Goodyear tire & rubber company is expected to report its fiscal first-quarter earnings of $0.14 per share, which represents year-over-year growth of over 107% from a loss of -$1.87 per share seen in the same quarter a year ago.

The company, whose brands include Kelly and Dunlop, would report its Q2 2021 period on July 29, 2021. The company would post revenue of $4.134 billion up from $2.1 billion a year ago.

“For Q221, we model group revenue of $4,134m, with volume +70% yoy (-7% vs Q219 levels, vs Q121 at -8%, in line with company commentary for a smaller decline vs 2019 levels in Q2), price/mix +9.8% driven by price increases as well as favourable geographic and channel mix, and FX at +3.5%,” noted Victoria Greer, equity analyst at Morgan Stanley.

“In the SOI walk, we assume volume at +$331m, overhead at +$225m (reversing most of the -$299m unabsorbed fixed cost from Q220), raw materials at -$35m, price/mix at +$105m (stronger than Q121 at +$64m, but with further price increases to come in H2), cost savings vs inflation at -$19m (as the reversal of some one-off cost moves in Q220 more than offsets the Gadsden/Europe savings), and other at +$40m, comping the decline in other tire-related businesses, although tempered by some costs such as marketing returning.”

Goodyear shares surged more than 55% so far this year. The stock slumped about 2% to $17.13 on Friday.

Goodyear Stock Price Forecast

Four analysts who offered stock ratings for Goodyear in the last three months forecast the average price in 12 months of $17.00 with a high forecast of $21.00 and a low forecast of $12.00.

The average price target represents -0.93% from the last price of $17.16. Of those four analysts, none rated “Buy”, three rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $16 with a high of $23 under a bull scenario and $6 under the worst-case scenario. The firm gave an “Equal-weight” rating on the tire & rubber manufacturer company’s stock.

Several other analysts have also updated their stock outlook. Deutsche Bank raised the target price to $21 from $19. Citigroup lifted the price target to $19 from $17. CFRA increased the target price by $4 to $18.

Analyst Comments

“Significant margin declines during the latest raw materials up-cycle as Goodyear has struggled to pass on pricing – although we think this is well understood. We believe capacity reduction and the US plant closure, as well as the industry volume recovery, should drive a partial earnings recovery,” Morgan Stanley’s Greer added.

“Recovering some relative pricing is the main additional lever we see for further margin improvement. Each 50bps of margin is worth $0.23 (14%) to EPS, on our estimates – $1.60/share at the current multiple. The Cooper acquisition, expected to close in H221, could be significantly earnings enhancing based on the disclosed synergies; further plant closures could drive more upside in time.”

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