Key Stats for GT Stock
- Past-Week Performance: -14%
- 52-Week Range: $7 to $12
- Valuation Model Target Price: $13
- Implied Upside: 35%
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What Happened?
The Goodyear Tire & Rubber Company stock fell about 14% this week, closing near $9 per share as investors reacted to cautious first quarter guidance despite solid fourth quarter results. Shares moved lower as near-term earnings visibility weakened.
The stock is down because management projected a sharp slowdown in early 2026, guiding that Q1 volume will fall about 10% and warning of a $60 million unabsorbed overhead headwind.
That combination points to lower factory utilization and margin pressure as U.S. consumer replacement demand softens and dealers reduce elevated inventories.
CFO Christina Zamarro also said tariffs and other costs will remain a headwind in the first half, while commercial truck conditions continue to lag, reinforcing concern that earnings could dip before improving later in the year.
This week, management highlighted stronger Q4 performance, reporting revenue of $5 billion, segment operating income of $416 million, and non GAAP EPS of $0.39.
CEO Mark Stewart said the quarter delivered “the highest SOI and SOI margin the company has achieved in over 7 years,” while free cash flow exceeded $1 billion and net debt declined $2 billion year over year.
Institutional and analyst activity added to the story. Citigroup raised its price target from $9 to $10 and maintained a neutral rating.
CIBC World Market increased its stake by 34% to about 1.9 million shares, Allianz Asset Management boosted its holdings by 76% to about 1.1 million shares, while LSV Asset Management trimmed its position to about 4.9 million shares, reflecting mixed but active positioning around the earnings update.
Is GT Undervalued?
Under valuation assumptions, the stock is modeled using:
- Revenue Growth (CAGR): 0%
- Operating Margins: 6%
- Exit P/E Multiple: 11x
Revenue expectations reflect stabilization rather than strong expansion, consistent with forward projections showing flat top-line performance as consumer replacement demand normalizes and commercial truck markets gradually recover.
Earnings improvement depends more on margin recovery than aggressive revenue acceleration, particularly as operating margins rise from about 2% toward the modeled 6% level through richer product mix and cost discipline.
Based on these inputs, the model estimates a target price of $13, implying about 35% total upside from recent levels, indicating the stock appears undervalued.
Results over the next year hinge on several higher-impact drivers. Management plans to launch 1,700 new products in 2026 focused on premium 18-inch and above categories, where pricing power and margins are structurally stronger.
Greater penetration in larger rim sizes, which already represent about 50% of U.S. consumer replacement volume, could lift revenue per tire and improve operating leverage as volumes stabilize.
Commercial truck volumes also carry meaningful earnings sensitivity. Management noted that historical margin levels require 12 million to 13 million commercial units annually, versus roughly 11 million units in 2025, suggesting recovery in freight activity could materially improve profitability even without strong consumer growth.
At the same time, balance sheet improvement remains central to equity upside. Net debt declined roughly $2 billion year over year in Q4, and continued deleveraging alongside positive free cash flow could reduce financial risk and support multiple expansion.
At current levels, Goodyear appears undervalued, with future performance driven primarily by mix improvement, cost execution, commercial recovery, and ongoing balance sheet repair rather than rapid revenue growth.
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