uploads/2016/11/gt-pm-2.png

Berenberg Rated Goodyear Tire & Rubber Company as a ‘Buy’

By

Updated

Price movement

Goodyear Tire & Rubber Company (GT) has a market cap of $8.1 billion. It rose 1.8% to close at $30.47 per share on November 22, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -1.7%, -3.6%, and -5.8%, respectively, on the same day.

GT is trading 3.7% above its 20-day moving average, 1.4% below its 50-day moving average, and 3.4% above its 200-day moving average.

Article continues below advertisement

Related ETF and peers

The Schwab US Mid-Cap ETF (SCHM) invests 0.31% of its holdings in GT. The YTD price movement of SCHM was 12.9% on November 22.

The market caps of GT’s competitors are as follows:

  • Cooper Tire & Rubber (CTB) — $2.1 billion
  • Boeing (BA) — $94.6 billion

GT’s rating

On November 22, 2016, Berenberg initiated the coverage of Goodyear Tire & Rubber (GT) with a “buy” rating and also set the stock’s price target at $36.00 per share.

Article continues below advertisement

Performance of Goodyear Tire & Rubber in 3Q16

Goodyear Tire & Rubber reported 3Q16 net sales of $3.8 billion, a fall of 9.5% from its net sales of $4.2 billion in 3Q15. This fall was due to the deconsolidation of its Venezuelan operations.

Its net income and EPS (earnings per share) rose to $317.0 million and $1.19, respectively, in 3Q16, compared to $271.0 million and $0.99, respectively, in 3Q15. This rise was due to some income tax benefits, and it was partially offset by rationalization charges. GT reported adjusted EPS of $1.17 in 3Q16, a rise of 18.2% over 3Q15.

GT’s cash and cash equivalents fell 33.9%, and its inventories rose 11.8% between 4Q15 and 3Q16. Its current ratio rose to 1.4x, and its debt-to-equity ratio fell to 2.6x in 3Q16, compared to 1.2x and 3.0x, respectively, in 4Q15.

During 3Q16, the company repurchased 1.7 million shares worth $50 million under its share repurchase program.

Projections

Goodyear Tire & Rubber (GT) expects total segment operating income of ~$2 billion in 2016. Goodyear has confirmed the following financial targets:

  • annual segment operating income of $3.0 billion in 2020
  • cumulative free cash flow in the range of $4.3 billion–$4.9 billion between 2017 and 2020

Next, let’s discuss PepsiCo (PEP).

Advertisement

More From Market Realist