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Goodyear Tire & Rubber Announces Its Plan for Expansion

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Price movement

Goodyear Tire & Rubber Company (GT) fell 1.8% to close at $27.79 per share during the first week of November 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -1.8%, -15.2%, and -14.1%, respectively, as of November 4.

GT is trading 9.6% below its 20-day moving average, 10.3% below its 50-day moving average, and 5.4% below its 200-day moving average.

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Related ETF and peers

The Schwab US Mid-Cap ETF (SCHM) invests 0.31% of its holdings in GT. The ETF tracks a market cap–weighted index of mid-cap stocks in the Dow Jones US Total Stock Market Index. The YTD price movement of SCHM was 3.8% on November 4.

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

  • Cooper Tire & Rubber Company (CTB) — $1.9 billion
  • Boeing Company (BA) — $86.6 billion

Latest news on GT

In a press release on November 2, 2016, GT reported, “The Goodyear Tire & Rubber Company (GT) today announced it has broken ground on a $485 million expansion of its state-of-the-art tire factory in Pulandian, Dalian, China.”

It also added, “When completed in 2020, the expansion will increase the plant’s capacity by about 5 million tires a year, enabling Goodyear to meet the strong and growing market demand for premium, large-rim-diameter consumer tires in China and the Asia-Pacific region.”

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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 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 Cal-Maine Foods (CALM).

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