Shares of The Goodyear Tire & Rubber (GT) have hit a new yearly low of $23.28 on Friday. The downward trend in the stock movement was caused by its finance chief Laura Thompson’s retirement plan announced in the last week. The tire maker’s stock was also hurt by the non-relaxation of the President Donald Trump’s stance on imposing limits on Chinese investments.
In reply, China is now intending to impose extensive tariffs on various goods from the US. Also, from July 1, China has agreed to reduce or remove current border tariffs or taxes for goods from South Korea, India, Bangladesh, Laos, and Sri Lanka. Trade analysts feel that this is China’s strategy to look for different sources for goods that it imports from the US. Also, experts believe this might trigger a trade war between the two countries.
During the recently-completed first-quarter, Goodyear posted a 55% dip in earnings due to higher raw material costs, lower tire unit volumes and reduced industry demand for consumer tires in the US and Europe. Tire unit volumes declined 2.5%, original equipment unit volume decreased 4%, and replacement tire shipments slid 2%.
As of March 31, 2018, the company had a 20% drop in cash and cash equivalents from December 31, 2017. Goodyear’s current assets have risen by 6.7%, while current liabilities dropped 1.7%. Long-term debt and capital leases have jumped by 10.3% and total shareholders’ equity has risen slightly by 2.3%.
Goodyear had a cash inflow from financing activities during the first quarter, but it was not sufficient to meet the cash outflow from operating and investing activities and the company spent more cash during the quarter on its operations.
Despite the bitter results, seven out of the eleven market analysts are expecting a “strong buy” or “buy” rating and four are maintaining a “hold” rating with an average price target of $32.29. However, the market sees an 11.40% drop in earnings for the second quarter of 2018. For the next five years, analysts are looking for a growth estimate of 6.49% per annum.
Shares of the tire manufacturer plummeted 27% year-to-date and 32% in the past one year. The stock had been trading between $23.35 and $36.52 for the past 52 weeks.