The Goodyear Tire & Rubber Company (GT) might be seeing higher input costs, but management has keep the business thriving. Growth rates are soaring and shares are still a good value.
With estimates rising and a nice earnings track record, GT is a Zacks #1 Rank (Strong Buy).
Company Description
Goodyear is a well known global tire company and probably needs not further introduction.
Strength Across the Board
On Apr 29 the company reported quarterly results that were driven by record-highs in sales from all 4 business units. That pushed sales 27% higher, to $5.4 billion. Higher prices led to some of that increase, but volumes were up 7% as well.
Net income came in at $127 million, or $0.51 per share. That is up from a loss a year ago and an impressive $0.38 higher than the Zacks Consensus Estimate. This was their sixth consecutive earnings surprise.
Estimates Jump
After hearing the results and that Goodyear expects growth to continue throughout the year, analysts raised their 2011 outlook. Projections for the full year are averaging $0.98, up 42 cents in the past 2 months. Next year’s consensus estimate is at $2.10, up 21 cents.
Last year Goodyear earned $0.44 per share, so analysts are expecting earnings to more than double in each of the next 2 years.
A Good Deal
Right now shares of GT are exchanging hands at 16 times forward estimates. That does not scream value, but with a growth rate of 41% over the next 5 year, the PEG is only 0.4. The price to sales is coming in at just 0.2.
The Chart
Investors loved the earnings news initially, sending shares higher, but that was short lived as the market hit a rough patch. But with the price at pre-announcement levels and higher estimates, this should be a great buying opportunity.
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Small Cap Trader service
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