Goodyear Tire & Rubber Company ( NASDAQ: GT ) stock slipped on Friday as Deutsche Bank analyst Emmanuel Rosner took a dim view of the company’s latest earnings update.
He termed the update “bizarre,” noting that disappointing Q1 guidance following a weak Q report, but bullish longer-term guidance. Rosner highlighted weak volumes and “large inflationary pressure” in the Q4 report, which he suspects will persist into 2023.
“Management acknowledged as much and guided to considerable additional decline in 1Q23 SOI driven by weakening volumes globally, low overhead cost absorption, and additional non-material cost inflation,” he noted. “Yet it also suggested 2Q SOI could be nearly flat YoY at $360M+, and that the full year 2023 earnings could also be flat, requiring a 2H exit rate of ~$450M per quarter, a level GT has not attained since 2016.”
Rosner sees this forecast as unduly optimistic, creating more downside risk for the stock in quarters to come.
“We see considerable downside risk to company outlook, amid uncertain volume trajectory, persistently high costs, and growing competitive and pricing risk from recovery in imported tires and lower raw materials,” he concluded.
Rosner assigned a $10 price target to the stock alongside a Hold rating. Shares of Goodyear Tire ( GT ) skidded 2.06% on Friday.
Read more on the details of the recent earnings result .
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Deutsche Bank warns ‘bizarre’ earnings update from Goodyear elevates downside risk