Did you hear the one about Goodyear Tire & Rubber
Despite the progress the tire maker has been making, it just can't seem to put its accounting woes behind it. It released its fourth-quarter earnings two months late, announcing a restatement of earnings that reached all the way back to five years ago, reducing previously reported profits by $280 million; it should be no surprise that the company couldn't get its act together for the first-quarter earnings release.
Still, even while Goodyear will have endured the 10th quarterly loss in the last 14 quarters, the company said it expects to report a sharply smaller net loss of $75 million to $85 million for Q1. First-quarter sales are also expected to have had a robust growth spurt, surging ahead 23% to a record $4.3 billion.
That's the expectation, we just need to bide our time for the official details. It can't be too long, though, as Goodyear's loan covenants only give them to June 30 to get their numbers out, so the green eyeshade types working behind the scenes will undoubtedly be putting in some overtime.
If management's estimates are correct, there's a lot to be hopeful for. Despite weakening margins across the board, the North American division -- its largest, and the one that has stumbled the hardest in recent years -- is said to be improving significantly, even while margins took a hit because of rising oil prices. The company expects a further 5% increase in raw materials costs for the rest of the year, though. According to management, a $1 hike in oil prices can have a $20 million impact on segment operating income.
The past year hasn't been a good one for Goodyear. A restructuring cost more than $3 billion, 6,000 workers were laid off, and the company's Huntsville, Ala., plant was shut down. It had to restate earnings numerous times, delayed filing financial reports for months, and just when things were starting to look up, the company announced a probe of its European division.
The major tire companies have all had it tough lately, but the automakers, especially the Big Three -- General Motors
It could be that the results of the fourth and first quarters mean that Goodyear has turned the corner. But investors should keep their foot on the brakes for now. We'll have to see some consistent improvement quarter to quarter before we're willing to lay down rubber for this stock.
Motley Fool contributor Rich Duprey fantasizes about Krispy Kremes when looking at tires. He does not own any of the stocks mentioned in this article.