Goodyear Tire and Rubber Company (GT)

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$GT CFRA RAISES OPINION ON THE GOODYEAR TIRE & RUBBER COMPANY TO BUY FROM HOLD

September 6, 2019 (CFRA)
We maintain our 12-month target price of $15 based on 6.8x our '20 EPS estimate, a late-cycle discount to the stock's five-year average forward P/E of 8.7x. Our adjusted EPS estimates remain $1.60 for '19 and $2.20 for '20. The upgrade comes after a period of significant underperformance for GT, both on an absolute basis and relative to its closest comp, The Cooper Tire & Rubber Company (CTB 24 ***). GT shares are -40.2% YTD versus -25.2% for CTB and +19.0% for the S&P 500, following 2018 performance of -35.4% for GT, -7.3% for CTB and -6.2% for the S&P. While GT's 1H 2019 results were hideous, with adjusted EPS plummeting 60.7%, we see significantly easier comps in 2H 2019, as lower oil prices should help support margins (two-thirds of its raw materials costs are petroleum-based). We also see demand for higher-margin replacement tires (73% of GT's total tire sales last year) remaining steady and find the stock's current 5.2% dividend yield attractive.