Goodyear Tire & Rubber Company: An Ideal Time To Back Up The Truck

Core Viewpoint - Goodyear Tire & Rubber Company experienced a significant decline in stock price, dropping 15.1% on August 1, 2024, following disappointing revenue results for Q2 2024, which fell short of analyst expectations despite some positive earnings metrics [1][2]. Financial Performance - Revenue for Q2 2024 was reported at $4.57 billion, a decrease of 6.1$4.87 billion in Q2 2023, and $210 million lower than analyst forecasts [2]. - The Americas segment saw an 8.2$2.94 billion, primarily due to a 5.9% decrease in tire shipments, from 20.8 million to 19.6 million [3][4]. - The EMEA segment's sales fell by 4.6% from $1.34 billion to$1.28 billion, impacted by a decline in tire sales and foreign currency fluctuations [5][6]. - The Asia Pacific region was the only segment to show growth, with a 1.2% increase in sales from $587 million to$594 million, driven by a 32.2% rise in original equipment tire volume due to increased EV fitments in China [5][7]. Earnings and Profitability - The company reported earnings per share of $0.30, significantly better than the$0.73 loss in Q2 2023, and $0.19 above analyst expectations [8][9]. - Adjusted earnings improved from a loss of$97 million last year to a gain of $54 million this year, with GAAP loss turning into a gain of$85 million [9]. - EBITDA increased from $296 million to$483 million, indicating overall improvement in profitability metrics [9]. Cost-Cutting Initiatives - Goodyear's "Goodyear Forward" plan aims to sell $2 billion in assets and implement cost-cutting measures to reduce annual expenditures by$1.3 billion, with $162 million in savings achieved by Q2 2024 [10][11]. - The company has made progress in asset sales, agreeing to sell its Off-The-Road operations for$905 million, with further sales expected to follow [11][12]. Market Position and Valuation - Despite the revenue decline, the stock is viewed as attractively priced, trading in the mid-single digit range on both price-to-adjusted operating cash flow and EV to EBITDA basis [13]. - The increase in net debt by $314 million is noted, but it is expected to be offset by asset sales and improvements in the bottom line [12][14].