Why Goodyear Tire Shares Were Burning Rubber

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 (NASDAQ: GT  ) were zooming ahead today, gaining as much as 15% after second-quarter profits surged higher.

So what: Adjusted earnings per share for the tire maker more than doubled to $0.76 in the quarter from $0.33 a year ago, soaring past estimates of $0.48. Revenue actually fell 5% to $4.89 billion, but that still edged out estimates of $4.88 billion. Latin America sales were particularly strong, improving 6% as operating income in the region jumped 42%. Goodyear also overcame a 10% drop in North American revenue by focusing on higher-end tire sales, and said full-year operating income should be at the top end of its previously stated range of $1.4 billion to $1.5 billion.

Now what: The drop in revenue may be discouraging, but improving auto sales should help Goodyear's revenue stabilize. CEO Richard Kramer was optimistic about the current quarter, saying he expects a 3% to 5% volume increase on "continued improvement in emerging markets and slow but steady recovery in mature markets."  With the stock's 2013 P/E under 9, there should be plenty of upside potential if management can keep its promises. I'd expect shares to move higher.

Latin America may be Goodyear's savior, but in the auto market, China's where it's at. It's already the world's biggest car market, and growing fast.  A recent Motley Fool report, "2 Automakers to Buy for a Surging Chinese Market," names two global giants poised to reap major gains that could drive serious rewards for investors. You can read this report right now for free -- just click here for instant access.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2567563, ~/Articles/ArticleHandler.aspx, 9/28/2016 8:22:21 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 11 hours ago Sponsored by:
DOW 18,228.30 133.47 0.74%
S&P 500 2,159.93 13.83 0.64%
NASD 5,305.71 48.22 0.92%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/27/2016 4:00 PM
GT $31.90 Up +0.16 +0.50%
Goodyear Tire and… CAPS Rating: ***