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Why Goodyear Tire Plunged Over 13% Today

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Goodyear Tire & Rubber

In 2018, The Goodyear Tire & Rubber Company (GT) disappointed investors by yielding a -36.8% return. 2018 was the worst year for Goodyear Tire’s stock since 2009. In 2008, the stock fell 78.8%. As of January 14, the stock was trading on a positive note with 7.1% month-to-date gains against 3.0% and 4.1% in the S&P 500 Index (SPY) and NASDAQ Composite Index (QQQ), respectively. However, Goodyear Tire’s stock has erased all these gains. Let’s take a closer look.

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What’s driving the pessimism?

Earlier today, Goodyear Tire & Rubber released its preliminary results for the fourth quarter of 2018. These preliminary results reflected a 3% year-over-year fall in the company’s sales volume in the last quarter, much worse than its previous guidance of nearly flat sales volume. It blamed weakness in Chinese, Indian, and European markets.

Also, supply chain issues in the US market took a toll on the company’s sales volume.

According to the company’s preliminary results, its profits in other tire-related businesses—including the US chemical business—also fell. Due to these negative factors, the company lowered its full-year 2018 guidance to slightly below $1.3 billion. During its third-quarter 2018 earnings call, Goodyear management guided for 2018 earnings of ~$1.3 billion.

This negative update took a toll on investors’ sentiment and triggered a sharp sell-off in its stock. At 2:38 PM ET, GT was trading with nearly 13.4% the losses, marking its steepest daily decline since September 2011. The company is expected to release its fourth-quarter and full-year 2018 results on February 6, 2019.

Peer Cooper Tire & Rubber Company (CTB) was trading with 6.4% losses today.

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