Goodyear (GT) To Report Q2 Earnings: What's In The Cards?

The Goodyear Tire & Rubber Company (NASDAQ:GT) is set to report second-quarter 2016 results on Jul 27. In the last quarter, this tire manufacturer had posted a positive earnings surprise of 2.86%. Let us see how things are shaping up for this announcement.

Factors Influencing this Quarter

Goodyear regularly launches innovative products and services to boost sales. The company is benefiting from lower raw material costs, strong economic trends in North America and continued cost savings. Further, Goodyear has been redeeming some of its outstanding senior notes using the proceeds from the offering of new senior notes with lower interest rate. These transactions will reduce the interest expense of the company. The removal of Sumitomo Rubber’s minority interest in Goodyear Dunlop Tires Europe B.V. is also expected to increase Goodyear’s earnings.

Goodyear attained record-high segment operating income in 2013, 2014, 2015 and the first quarter of 2016. However, the company’s revenue has been declining over the years due to unfavorable foreign currency translation as well as other factors. These trends are expected to continue this quarter as well.

In Latin America, Goodyear is facing challenges in terms of a volatile political and economic environment, lower production volume in Venezuela and Brazil, and high currency fluctuations.

Earnings Whispers

Our proven model does not conclusively show that Goodyear is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: The Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. Goodyear has an Earnings ESP of -8.65% because the Most Accurate estimate of 95 cents stands below the Zacks Consensus Estimate of $1.04.

Zacks Rank: Goodyear’s Zacks Rank #2 (Buy) increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Westport Fuel Systems Inc. (NASDAQ:WPRT) has an Earnings ESP of +9.09% and a Zacks Rank #3 (Hold). The company’s second-quarter 2016 financial results are expected to release on Aug 3.

Allison Transmission Holdings, Inc. (NYSE:ALSN) has an Earnings ESP of +6.35% and a Zacks Rank #3. The company’s second-quarter 2016 financial results are expected to release on Jul 27.

Tower International, Inc. (NYSE:TOWR) has an Earnings ESP of +2.82% and a Zacks Rank #3. The company’s second-quarter 2016 financial results are expected to release on Jul 26.