Images

Goodyear's revenue declined, but its earnings improved. Image source: Goodyear Tire & Rubber

Yesterday morning, Goodyear Tire & Rubber (NASDAQ:GT) reported third-quarter earnings, and its miss on revenue sent the stock plunging more than 6% Tuesday. Goodyear reported strong bottom-line results in North America, but investors were apparently focused on its overall revenue miss. While the stock is currently plunging, I think there are quite a few positive points in Goodyear's third quarter.

"Our third quarter results, announced just weeks after our recent Investor Day, demonstrate continued sustainable earnings growth and the type of disciplined execution needed to deliver on our targets in 2013 and beyond," Chairman and CEO Richard J. Kramer said in a press release. 

In fact, Goodyear's third-quarter net income available to common shareholders was $166 million, or $0.62 per share, which is up 51% from its third quarter last year. Excluding one-time items, earnings hit $0.68 per share, topping Wall Street estimates.

Goodyear's third-quarter segment operating income is up 24% to $431 million. In year-over-year comparisons, each of the four market segments posted improved earnings and operating margin. Those segments break down into North America; Europe, Middle East and Africa; Latin America; and Asia Pacific.

Goodyear's North America business reflected its overall results with sales declining 9% from last year, down to $2.2 billion. Even with the weakness in sales, Goodyear was able to improve its North America operating income by 24% to $161 million -- setting a third-quarter record.

Driven by strength in North and Latin America, the company expects record segment operating income of more than $1.5 billion for the year. Goodyear also continues to target between 10% and 15% annual growth in segment operating income through 2016.

Projected consistent earnings growth through 2016 is one reason Goodyear was able to reinstate its dividend last month after more than a decade of absence. Goodyear also announced it would initiate a share buyback program with an allowance of up to $100 million.

"Our capital allocation plan demonstrates Goodyear's commitment to creating value for shareholders while maintaining financial flexibility to execute our strategic plan, continuing to strengthen our balance sheet and investing for future growth," Kramer said.

Bottom line
Sure, Goodyear is trading more than 6% lower today, but investors should keep in mind how the stock has traded over the last full year. 

GT Chart

GT data by YCharts.

The company is continuing to take the right steps to shore up its bottom line, as its growing earnings show. Goodyear is seeing strong growth in targeted segments, and as the industry continues to recover, revenue should begin to improve as well. In the meantime, management is returning value to shareholders through its freshly reinstated dividend and share buyback program. Even after this year's run-up in price, Goodyear still looks fairly attractive at a 6.5 forward P/E and price-to-cash flow of 5.3, especially as revenues could turn around and allow its bottom line to expand further in the coming years. That said, Goodyear merely remains on my watchlist until I see it taking more steps to shore up its balance sheet -- specifically, lowering its long-term debt level of $6.3 billion, which exceeds its market capitalization. It should be noted that while its LTD to capitalization remains high, the amount due within one year is extremely low and very manageable. 

Fool contributor Daniel Miller has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.