Goodyear Tire (GT) Stock: Rolling Ahead While Markets Tumble

TLDR:

Table of Contents

Goodyear stock rose approximately 12% during a significant market selloff
Deutsche Bank upgraded Goodyear to “buy” with a $13 price target
Company benefits from less tariff exposure due to domestic manufacturing
Replacement tires (82% of sales) offer higher margins than new tires
Goodyear’s cost-cutting “Goodyear Forward” plan is showing positive results

Amidst Thursday’s brutal market selloff that saw the Dow Jones Industrial Average plummet around 1,500 points and the Nasdaq drop over 5%, one company managed to stand out from the crowd. Goodyear Tire & Rubber Company (NASDAQ ) emerged as the day’s top gainer, with shares climbing approximately 12%.

This unexpected rise comes at a time when most stocks across all sectors took heavy hits. The remarkable performance has caught the attention of investors and analysts alike.

The primary driver behind Goodyear’s stock surge appears to be its unique position regarding recently announced tariffs. The company has less exposure to these trade measures compared to its major competitors.

This advantage prompted Deutsche Bank to upgrade Goodyear’s stock this week. Edison Yu, an analyst at the bank, noted in a research report that Goodyear should be a winner during the current trade tensions.

Domestic Manufacturing Advantage

The key to Goodyear’s tariff resilience lies in its manufacturing footprint. The Akron, Ohio-based company produces most of its tires within the United States.

This domestic production means Goodyear isn’t facing the same cost increases that many competitors must deal with. While rivals will need to pay tariffs on imported products, Goodyear can avoid many of these extra expenses.

The company’s U.S. demand is largely met through domestic manufacturing, shielding it from the financial impact of import tariffs. This gives Goodyear a competitive edge in pricing and margins.

Reciprocal tariffs announced Wednesday could also hamper competition from low-cost imports from countries like Thailand. This potential reduction in foreign competition could further strengthen Goodyear’s market position.

In contrast, Japan-based rival Bridgestone saw its shares decline by around 4% during Thursday’s trading session. This divergence highlights the different impacts tariffs can have on companies within the same industry.

Replacement Tire Business

Another factor working in Goodyear’s favor is its focus on replacement tires. These products account for about 82% of the company’s sales.

Replacement tires offer higher profit margins compared to original equipment (OE) tires that are sold directly to automakers for new vehicles. This business model provides Goodyear with stronger revenue potential.

The tariff situation may actually boost this segment of Goodyear’s business. With automakers facing high tariffs, new car prices are expected to increase substantially.

Higher vehicle costs could lead more consumers to keep their current cars instead of purchasing new ones. This trend would likely drive up demand for replacement tires as people maintain their existing vehicles for longer periods.

Analysts have calculated that even a 15% drop in new tire sales for 2025 would require just a 2.25% growth in replacement tire sales to offset the loss. This is possible due to the higher margins on replacement products.

Cost-Cutting Measures Bearing Fruit

Beyond its tariff advantages, Goodyear has been implementing a comprehensive turnaround strategy called “Goodyear Forward.” This initiative focuses on streamlining expenses and improving operational efficiency.

The company has already divested some underperforming businesses and is in the process of selling other assets. These moves are part of Goodyear’s larger plan to achieve $1.5 billion in cost savings and margin improvements by the end of 2026.

These efforts are already showing positive results. In the fourth quarter, Goodyear reported net income of $76 million, or 26 cents per share. This marks a dramatic improvement from the $291 million net loss reported in the same quarter of the previous year.

Deutsche Bank has taken notice of these improvements. The bank upgraded Goodyear stock to a “buy” rating and set a price target of $13 per share. This target represents a potential 30% increase from the current share price.

The consensus price target from analysts stands at $11.75 per share, which still suggests a 13% upside potential. This is particularly notable given expectations for generally sluggish market performance in the near term.

With its competitive advantages in manufacturing, strong replacement tire business, and aggressive cost reduction initiatives, Goodyear appears well-positioned to gain market share in the coming months.

The company’s stock performance on Thursday demonstrates that even in challenging market conditions, businesses with the right positioning can deliver value to investors. As tariff impacts continue to reshape competitive landscapes across industries, Goodyear’s strategic advantages may continue to yield benefits.

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