Goodyear Tire is rolling again

After a long, hard slog, the tire maker's turnaround is so secure that it has finally reinstated a dividend.

By Jonathan Berr Sep 23, 2013 9:28AM
Sometimes stocks that aren't in sexy businesses offer pretty enticing returns. Goodyear Tire & Rubber (GT) is a case in point.

Over the last decade or so, practically anything that could go wrong for the Akron, Ohio, tire company has gone wrong. The industry's top business has shuttered factories, laid off workers and watched its share price plunge to an all-time low. But Goodyear has managed to put the bad times behind it.
As The Wall Street Journal noted, the company has shifted away from making low-end tires that generate slim profits in favor of more complex and lucrative ones. The results have been dramatic. About 75% of Goodyear's tires currently sell for about $130 each. Six years ago, about 40% of its tires fetched about $60.

Investors who stuck by Goodyear have been rewarded. Its shares have surged more than 60% this year. And on Friday, the company said it would again pay a quarterly dividend this year for the first time in 2002. In the financial world, that's a geological age between payouts. It also announced plans for a $100 million stock repurchase.

Goodyear Tire & Rubber Co. tires are displayed for sale at Certified Tire and Service Centers, a Goodyear dealership in Huntington Beach, Calif. on July 29, 2013 (© Patrick T. Fallon/Bloomberg via Getty Images)Goodyear has plenty going for it. Auto sales have been on a torrid pace this year as consumers who held off replacing their cars during the Great Recession headed to showrooms. These sales may ebb toward year-end, given that economic growth remains lackluster. Goodyear's good times, though, may keep on rolling.

Although its shares are already above Wall Street's average 52-week price target of $18.67, several analysts have recently raised their targets to between $21 and $24. Several firms, including Deutsche Bank, Argus and Citibank, have "buy" ratings on the shares.

Plus, that new dividend only adds to the luster of an already attractive stock.
 
Still, there’s no rush to grab Goodyear now because the good news is largely factored into the stock price. The shares trade at a price-to-earnings ratio of about 18, which is a premium to automakers GM and Ford. Investors should wait for a pullback before adding the stock to their portfolio.

Jonathan Berr does not own shares of the listed stocks.  Follow him on Twitter @jdberr and at Berr's World.
Tags: GT
30Comments
Sep 23, 2013 11:41AM
avatar
I never had a problem with Goodyear tires. When I tried other tires (BF Goodrich or Firestone) I had all kinds of troubles. It is just like the American car companies. People get it in their head that they are no good and it is trendy to buy foreign and the domestic suffers. Try staying true to your own country and it's products and make this country great again. Stop selling the farm on something you think is cool.
Sep 23, 2013 10:34AM
avatar
Goodyear's decline was because folks got tired (no pun intended) of putting their crappy tires on their cars and having bad results with them.  If they have fixed their quality problems, then I applaud.  If not, then it will be a rerun.
Sep 23, 2013 11:20AM
avatar
I am glad to se they are making better tires. They were pretty poor for awhile.
Sep 23, 2013 1:16PM
avatar

No problems with Goodyear's in the past...

 

But now making it "a priority to buy only" American Made tires..

You have to spend a little more, but worth it.

And you have to go up to a mid range tire..

Recently bought 2 sets for 2 cars of Cooper's tires...Mid-range, made in U.S.

You can do the same with Goodyear. 

Sep 23, 2013 11:10AM
avatar
I've been using Goodyear tires for 25 years, and am extremely happy with them. Most police and first responders all roll on Goodyear tires, too... Look at what's available out there, Goodyear is a good deal.
Sep 23, 2013 1:14PM
avatar

Buying Union! How to be sure you're buying USW-made tires.  The two symbols (either two letters or a letter and a number) which follow “DOT” indicate the company and the plant where a tire was manufactured.

Code                Company/Location
(Parent Company)
                                     USW Local Union No.
BE B. F. Goodrich, Tuscaloosa, AL
(Michelin)
351L
BF B. F. Goodrich, Woodburn, IN
(Michelin)
715L
AN B. F. Goodrich, Opelika, AL
(Michelin)
753L
VE/YE/YU/8B Bridgestone/Firestone, Des Moines, IA
(Bridgestone)
310L
2M/3M Bridgestone/Firestone, Bloomington, IL
(Bridgestone)
787L
D2/E3/W1/Y7 Bridgestone/Firestone, Lavergne, TN
(Bridgestone)
1055L
2C/4D/5D Bridgestone/Firestone, Morrison, TN
(Bridgestone)
1155L
UP Cooper, Findlay, OH 207L
UT Cooper, Texarkana, AR 752L
DY Denman, Warren, OH
(Penslar Capital)
98L
DA Dunlop, Buffalo, NY
(Goodyear)
135L
JJ/MD/PU Goodyear, Gadsden, AL 12L
JN/MJ/PY Goodyear, Topeka, KS 307L
JE/MC/PT Goodyear, Danville, VA 831L
JT/MK/TA Goodyear, Union City, TN 878L
JP/MP/PL Kelly-Springfield, Tyler, TX
(Goodyear)
746L
JF/MM/PJ Kelly-Springfield, Fayetteville, NC
(Goodyear)
959L
CC Yokohama Tire, Salem, VA
(Yokohama)
1023L
Sep 23, 2013 10:41AM
avatar

Does anybody know where the new rubber capital of the world is?It isn`t Akron,oh anymore.

it must be some other country.

avatar
i got eagle on my car i feel i spent to much between 800-900 dallors. next time i'll try another company. 
Sep 23, 2013 10:13AM
avatar
Goodyear bonds, are the good deal. Currently paying 7.5%
Sep 23, 2013 2:20PM
avatar
My cars have Goodyear Eagle GT's on them. The last set I bought surprised me as one of the tires failed 21 days after I bought it. It was very strange, but the tire split around the side while I was driving on the interstate. By the time I stopped my car, the inside of the tire had been grinded into powdered rubber. I still believe in the tires, and will likely buy more in the future. I have used the GT for over a decade.
Sep 24, 2013 8:46AM
avatar

The Goodyear tires I’ve had recent experience with on new (Rental) cars generally give a very poor ride. Tires offered on new cars meet OEM quality standards and are the best tires made by that particular company.  Tires that don’t meet OEM specifications are a lesser quality and are usually sold on the Retail market.

 

On one of my personal vehicles was purchased with Goodyear tires and it had a terrible ride until I finally replace the Goodyear tires with aftermarket Michelin tires. The Michelin tires made such a difference that it was hard to believe I was driving the same truck.

 

The next time you’re in a rental and experience a rough ride, look at the tires and I’ll bet they will be Goodyear.

avatar
In reply to someone about the 7.5% payout  by Goodyear,  GGN pays almost 20% monthly and WhZ pays over 20%
Sep 23, 2013 10:23AM
avatar

Do not buy GM bonds, they ripped off thousands of bond investors, on there last bankruptcy filing, got pennies on the dollar.

The US Gov. in the last GM bailout, awarded the lucky slobs, who worked at GM, a better package, than the people that actually had money invested in GM bonds.   

Sep 23, 2013 10:12AM
avatar
I once went through a gross of rubbers in a month and decided to call it a Good Year.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

114
114 rated 1
278
278 rated 2
474
474 rated 3
641
641 rated 4
639
639 rated 5
663
663 rated 6
640
640 rated 7
499
499 rated 8
284
284 rated 9
122
122 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
COPCONOCOPHILLIPS9
TAT&T Inc9
VZVERIZON COMMUNICATIONS9
KOGKODIAK OIL & GAS Corp9
CVXCHEVRON CORPORATION8
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.