Monday, February 7, 2011

Goodyear Tire & Rubber Co. (NYSE: GT): Q4 Earnings Preview 2010

Goodyear Tire & Rubber Co. (NYSE: GT) is scheduled to release its fourth-quarter financial results before the market open on Thursday, February 10, 2011. Analysts, on average, expect the company to post a loss of 7 cents per share on revenue of $4.82 billion. In the year ago quarter, the company reported earnings of 14 cents per share on revenue of $4.44 billion.

The Goodyear Tire & Rubber Company engages in the development, manufacture, distribution, and sale of tires and related products and services worldwide.

In the preceding third-quarter, the Akron, Ohio-based company's net loss was $20 million or $0.08 per share, compared to net income of $72 million or $0.30 per share in the 2009 quarter. Revenue rose to $4.962 billion from $4.385 billion. Analysts, on average, expected the company to report earnings of $0.10 per share on revenues of $4.79 billion. 

Goodyear's fortunes are largely tied to the auto industry. As the world tries to come out of economic recession, the first sector to witness positive movement has been the Automobile sector and since its linked to related sectors like tire industry, plastics industry and metal processing, all the sub sectors are slowly witnessing a silent revival. As more and more people look at buying automobiles, the tire industry is also set to attain a positive movement from the pits, where it has been for most of last year. About a quarter of Goodyear's revenue comes from tires put on new cars. As a supplier for original tires for Ford Motor (NYSE: F), Toyota (NYSE: TM), and several GM (NYSE: GM) models among automakers, Goodyear benefits when car and truck sales rise, as they have lately.

The company has benefited from cost-saving actions. The company has succeeded in achieving cost reductions of $2.5 billion by 2009 and has targeted an additional $1 billion of gross savings by 2012. Howewver, rising raw material costs and pricing pressure from OEMs due to weak industry demand remain concerns. Further, its highly-leveraged balance sheet is worrisome. 

The company is using the capital generated from selling off foreign holdings to bolster domestic facilities. The efforts also appear aimed at paying down debt incurred during the recession when the struggles of the auto industry significantly impaired revenues.

Recently, Goodyear Tire & Rubber Co. reached an agreement to sell its European and Latin American farm tire businesses, and a licensing agreement, for about $130 million. 

Among other developments, Appaloosa Management founder David Tepper recently reported a 6.1% stake in Goodyear Tire & Rubber.

Full Disclosure: None.
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