Shares of Goodyear Tire & Rubber (NASDAQ:GT), a manufacturer of rubber tires for automobiles, trucks, buses, and aircraft, among other vehicles, are down 16% after the company reported a disappointing first-quarter result.
There's no question Goodyear Tire felt the negative impact from the COVID-19 outbreak during the first quarter. Sales declined 15% to $3.1 billion, which just barely topped analysts' top-line estimates. First-quarter adjusted net loss was $0.60 per share, far worse than the prior year's adjusted net income of $0.19 per share and below analysts' estimates calling for a $0.25 per share loss. The difficult first quarter was driven by a drop in demand following stay-at-home orders and a shutdown of many manufacturing plants. Replacement tire shipments declined 16% from the prior year, while original equipment unit volume dropped 21% and tire unit volumes declined 18%. "While this unprecedented crisis continues to disrupt our business and the broader automotive industry, I am confident we will emerge from this crisis in a strong position," said Richard J. Kramer, chairman, chief executive officer, and president.
As with most businesses right now, amid the COVID-19 outbreak, management's focus will be on its liquidity, damage control, and developing a strategy to reopen safely. Goodyear Tire's cash and available liquidity sits at roughly $3.6 billion, and its global manufacturing facilities will begin a phased restart of production during the second quarter -- the majority of its facilities should be operating by the end of May. There has been progress in China: The company's plant in Pulandian, China, is operating with its full workforce. Investors would be wise to temper expectations for a quick rebound in parts of the auto industry, as the lost miles driven during stay-at-home orders, which would have fueled replacement tire volume and sales of other products, will likely never fully be made up -- and a rebound in total miles driven may not happen overnight, either.