Goodyear Tire & Rubber Shares Got Crushed: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Goodyear Tire & Rubber (NYSE: GT  ) deflated a tire during a burnout today, falling 10% after a presentation to investors today.

So what: At the Deutsche Bank Global Auto Conference, management made cautious comments that sent investors fleeing the tire maker. The presentation points to soft volume across all regions, cost savings below inflation, and the Thai flood impact as negatives for the company.

Now what: The company said results for 2011 were strong, but recent trends had been more challenging. The market seems to have priced in an extremely challenging market, with shares trading at less than 6 times 2012 earnings estimates. With the company targeting $1.6 billion in operating income in 2013 and the company's market cap at just $3.4 billion, I think this stock is worth the risk.

I'll even back up my statements with an outperform CAPScall, giving Goodyear a green thumb on My CAPS page.

Interested in more info on Goodyear Tire & Rubber? Add it to your watchlist.

Fool contributor Travis Hoium has no position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw.

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  • Report this Comment On January 11, 2012, at 1:02 AM, kwaonzit wrote:

    Thankyou Mr. Hoium for you're calm approach to a mini feeding frenzy relating to market reaction following today's public presentation,by Darren R. Wells,CFO,of Goodyear Tire & Rubber Co. I am a long and short investor,presently,so I admit to a vested intrest in general to preservation and growth of my investment. I understand the risks associated with my choices. I feel,however,that today's GT selloff represents a convergence of multiple and unrelated forces synergistically that precipitated the (unwarranted) late morning freefall. My first humble opinion is;GT was a victim of percieved lack of investor confidence,because,if one notes the coinciding rythms between the markets in general,and GT's momentum,in the last 3 weeks,an unatural divergance appears. Unless favorable,or unfavorable newsworthy events singular to GT (ie;quarterly reports,warnings,ect.) appeared,GT would follow trends closely with the S&P 500,albeit,more sharply,relatively. What the last 3 weeks tells me about GT,is,they were on a honeymoon,if you will,from normal short profit taking. One may interpret that many ways. In my optimistic view,I saw that as conformation of confidence in an undervalued stock. Certainly not a perfect company,certainly not a company without a few skeletons rattling about. But a company,leaner,meaner,and well poised to gain from positive news throughout the automotive sectors,as well as the mining sectors. Goodyear is Caterpillar's #1 off road tire supplier. Goodyear has a massive brand new state of art,earthmover tire facility in Topeka Ks. It's main objective,compete and take market share,in the ultra 63" radial earthmover tire line. A specialty tire for sure. For now,the largest tire made. Extreme modernisations were also made to the entire off road ticket. Bias tires are gone. The entire division is brand new. It must be labeled as a feast or famine enterprise,though,the earthmovers. Before the '08 housing meltdown really hit,even as $150.00 oil briefly hit,there was a great unending backorder for the off-roads. A year later,silence. Maybe I should've wrote a book,'stead of a blog. So,my first point was,short traders cashed out,(today),institutional software sold it,and skittish investors ran away. Here's my second point,about today's GT presentation,so what. Excuse me,but most vehicles today run on all season tires,the warm weather surely has increased miles driven overall,and these tires will need replaced sooner. And folks,Goodyears main nemisis (no not Bridgestone!),the almighty RAW rubber material that has been forever their achilles heel,sucking up cash,hurting profits,is forecast to be abnormally overstocked and underpriced the next year. Automobile sales forecasts are bullishly robust for 2012. Goodyear has made enormous changes to its legacy costs (aka,2006 USW strike),helping its financial health. There are no union contracts coming up near term to muddy the waters. Goodyear has a good management team in place,if you don't think so,look at all the positive earnings and quarterly reports since 2007,and they're generally 'young' guys n gals,with vision. Of course,I don't know everything,but I do know GT's drop yesterday was unwarranted. GPA

  • Report this Comment On January 11, 2012, at 4:52 AM, kwaonzit wrote:

    Excuse me,IOydz,but exactly what does your advertisement have to do with GT? A person's got a right to eat,but this ain't no depression,you can find work other than marketing robo spam. I can tell you a thing or two about oil too. Let me just toss a few out here. Hubberts Peak, Saudi Arabia,Ghawar,Spindletop Texas,Baku Russia,Maracaibo Venezuela,peak oil. Mr.ioydz,I would suspect an idiot could make money in oil. The only reason I don't is because I don't play card games or invest money,unless I fully understand all the rules. It's reasonable to assume,that with a 7 billion population,and oil in decline,somebody's making money. With the death of Ghawar,comes the death of many,if not the end of civilization. Does it make you a bit uneasy to know that the Royal Kingdom is currently using a third of its own oil production and its own yearly consumption increases are second only to China? Everybody in a vast desert deserves air conditioning,right? So,make your money now,like I'm trying to do,before its too late.

  • Report this Comment On January 11, 2012, at 6:16 AM, kwaonzit wrote:

    My last post,I promise. I have one more point to make,regarding Goodyear Tire Co. It's kind of a floating reality that casual observers,outside the industry,may not quite understand. In today's global environment,many corporate household names (American) still maintain a strong presence on the North American continent. Goodyear being one of them. But,make no mistake about it,there should be no nashing of the teeth concerning any implied threat that foreign (in this case,tires) competition should be of any concern. I will tell you why. Goodyear has either,shutdown,sold off,or moved off shore,all its low (profit) margin tires. Its a simple fact of economic reality. A simple constructed compact car tire cannot be built here anymore. It just cannot compete with oversea's cost advantages. Gadsden Al,Tyler Tx,Union City Tenn,all former GT tire production plants,shut down in very recent years. It is also true,that Goodyear (not being ignorant) profits none-the-less,thru co-ownership of foreign label companies,or outright interest in others. Its true,however,that Goodyear's market share can still be impacted by foreign competitors (as well as domestic) on the higher margin tires,but for now,concerns are minimal,given the entrenched front lines on the battlefield. So,Goodyears North American philosophy is,If we build it here,it must be a high margin tire,a quality tire,and hard for anyone else to compete with. This much I know also,if there was a division segment not making money,first place you would look was North American Tire (GT),so vague as I am regarding offshore operations,that's where most of the profits (if there were profits,that year) would come from. Sales in Europe,Asia,ect. Had enough yet? Me too. Its been fun and I learned alot!

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