Goodyear Tire & Rubber (GT), a major maker of truck and industrial tires, is tied closely to the rise and fall of global economic demand. Being a big player counts for something, however, so a weak medium term might signal a good entry point for a long-term position on the stock.
Goodyear Tire & Rubber is one of the world’s leading manufacturers of tires, engaging in operations in most regions of the world. Net sales for 2011 came to $23 billion, while net income available to common shareholders equaled $321 million.
The company develops, manufactures, markets and distributes tires for most applications and manufactures and markets rubber-related chemicals. It is one of the world’s largest operators of commercial truck service and tire retreading centers and operates approximately 1,400 tire and auto service center outlets.
Goodyear has manufacturing operations in 22 countries and approximately 73,000 full-time and temporary associates worldwide.
The company makes and sells tires under the Goodyear, Dunlop, Kelly, Debica, Sava and Fulda brands and various other Goodyear-owned “house” brands, as well as the private-label brands of certain customers. Approximately 83 percent of sales is new tires. Sales of chemical products and natural rubber to unaffiliated customers were 7 percent.
Goodyear Tire & Rubber has a market cap of $2.49 billion in a sector, auto components, where the average company size is $1.68 billion. Its trailing 12-month P/E ratio is 13.06 and its five-year projected price-to-earnings-growth (PEG) ratio is 0.30, compared to 1.21 for the sector.
Its projected earnings per share growth for the coming year is 25 percent, compared to a sector average of 20.16 percent.
Weak demand
Wall Street is divided on Goodyear. Deutsche Bank rates the stock a buy, as do the analysts at Citigroup. Goldman Sachs, however, considers the share a sell and Morgan Stanley rates it at underperform.
“We are optimistic about Goodyear's benefit from its focus in the emerging markets of Latin America, Eastern Europe and Asia. However, the company faces pricing pressure from original equipment manufacturers due to weak industry demand,” report the analysts at Zacks, rating the stock at neutral with $12 target price.
Goodyear Tire & Rubber next reports on July 26.
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