Goodyear Shares Struggle with “External Forces”

Tuesday saw a significant drop in the price of Goodyear shares on the NYSE, leading analysts at KeyBanc Capital Markets to drop their company rating from “Buy” to “Hold” and lower 2008 earnings estimates on the stock by 30 cents (to $1.90 per share). Afternoon trading resulted in Goodyear shares dropping $2.36 (12 per cent) to $18.05.

Analyst Saul Ludwig wrote that, “Strategically Goodyear is doing several right things (cutting high cost capacity, VEBA [an agreement reducing the company’s legacy costs], enriching its mix and investing in automation), but external forces and competitive dynamics make it difficult to achieve full earnings potential until at least 2010, in our opinion.” The report also noted that the company has been unable to offset overhead costs, alongside production undergoing significant cuts in Europe and North America. While it is predicted that the company will rebound alongside tyre demand – thanks to falling fuel and raw materials costs – in 2009, the analyst believes that it will be 2010 before Goodyear fulfils its earnings potential.