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Why Did Goodyear Tire & Rubber Decline on April 25?

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Goodyear Tire & Rubber  

Goodyear Tire & Rubber (GT), which is an American multinational tire manufacturing company, was among the S&P 500’s top losses on April 25. After pulling back last week, Goodyear Tire & Rubber started this week on a weaker note and declined as the week progressed. On Wednesday, Goodyear Tire & Rubber opened the day lower and declined to the lowest levels traded since July 2016.

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Weak market sentiment

The market sentiment on Goodyear Tire & Rubber was already weak. The market sentiment weakened more following the release of the company’s 1Q18 earnings report. According to management, the net income in 1Q18 was $75 million—a drop of 55% YoY (year-over-year) compared to $166 million reported in 1Q17. The operating income declined 28% YoY to $281 million in 1Q18. Increased raw material costs contributed to the huge drop in the operating income. Raw materials are used to manufacture tires.

Raw material costs impact the outlook

Goodyear Tire & Rubber’s revenues in 1Q18 were $3.83 billion—better than analysts’ forecast of $3.82 billion and 3.2% growth YoY compared to the revenues reported in 1Q17. The EPS (earnings per share) in the reported period was $0.5—better than analysts’ forecast of $0.46 and 32% lower YoY. Management expects the raw material costs to increase by $50 million in 2018 compared to 2017. Crude oil’s rise in 2018 increased Goodyear Tire & Rubber’s raw material costs, which are oil-based derivatives. Management expects the 2Q18 revenues to decline by $65 million YoY.

On April 25, Goodyear Tire & Rubber declined 5.1% and closed the day at $25.51. Goodyear Tire & Rubber is part of the S&P 500 Consumer Discretionary sector, which gained 0.38% on April 25.

Next, we’ll discuss how Capital One Financial (COF) performed on April 25.

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