Why Goodyear Tire Stock Popped Today

Shares of Goodyear Tire (NASDAQ: GT) were moving higher today after the auto-parts company posted better-than-expected results on the bottom line in its third-quarter earnings report, showing that its transformation plan was starting to pay off. As of 2:36 p.m. ET, Goodyear stock was up 13.9% on the news.

Goodyear heats up

Goodyear actually missed estimates on the top line, but investors were willing to overlook that as the company showed strong margin improvement.

Revenue in the quarter fell 6.2% to $4.82 billion, which was below the consensus of $4.94 billion. Revenue was down partly due to divestitures, including its off-the-road tire business. The company sold 42.5 million tire units in the quarter, down from 45.3 million in the quarter a year ago.

Image source: Getty Images.

However, investors were most impressed with the bottom-line performance as the company delivered its fourth consecutive quarter of segment operating-income margin expansion. Segment operating margin improved from 6.5% to 7.2% and was up 300 basis points over the last four quarters.

On the bottom line, Goodyear reported adjusted earnings per share of $0.37, up from $0.36 in the quarter a year ago, and better than estimates of $0.21.

What's next for Goodyear

The tire industry hasn't been particularly rewarding for investors, and Goodyear Tire is still down sharply from its pandemic-era gains. However, management believes the Goodyear Forward transformation plan is paying off, and the improving operating margin is encouraging.

Management raised its guidance for earnings benefits from the program to $450 million in 2024 and $750 million in 2025. If the company continues to execute on that plan and expand its margins, the stock looks like a good bet to move higher as shares are cheap, based on the company's earnings over the last four quarters.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $22,050!*
• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $41,999!*
• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $407,440!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of November 4, 2024

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.