Goodyear Shares Lowered to Sell Rating

Deutsche Bank analysts have lowered Goodyear’s share advice rating from hold to sell. The announcement comes in spite of the fact that Goodyear’s shares have performed strongly since mid-October in response to positive news from the industry, stabilisation of market share losses, and increased optimism about a turnaround. However, now that the company’s share price has reached 21 times the analysts’ 2005 estimate, the bank believes the price growth will slow down. According to the analystsm “the bull case is more than fully reflected.”

“We’ve got a $10 target,” they continue, acknowledging that that Goodyear has done an impressive job of turning around its fortunes in North America. Having said that, the bank contests the assertion that margins will increase significantly from here on, adding that margins “appear unsustainably high.”

“Earnings in 2005 are likely to be disappointing,” the analysts predict. “We have cut our 2005 estimate to $0.75 from $0.80, but even this may be optimistic. With no significant free cash flow, there’s not much room for error, particularly given significant pension/debt maturity cash obligations,” they add.