Goodyear Tire GT is one of the world’s leading manufacturers of tires engaged in the development, production, distribution and sale of tires for various applications. It also deals in rubber-related chemicals and is a major player in commercial truck services and tire retreading. With a global presence spanning 53 manufacturing facilities across 20 countries and approximately 800 retail outlets, Goodyear owns several well-known tire brands, including Cooper, Dunlop, Kelly, Mastercraft and Debica.

However, despite its strong industry footprint, Goodyear’s stock has struggled over the trailing 12-month period, declining 17.5%. This underperformance stands in stark contrast to the Zacks Auto, Tires and Trucks sector’s 5.1% growth and the S&P 500 index’s return of 19.7%.

Goodyear shares have also lagged behind industry peers like Michelin MGDDY over the same time frame. MGDDY shares have lost 5.6% over the trailing 12 months.

GT has been suffering from high debt, rising capital expenditure, inflation and intense market competition.

One-Year Performance

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The company’s shares are currently undervalued, as suggested by the Value Score of A. In terms of the forward 12-month price/sales, GT is trading at 0.15X, significantly lower than the broader sector’s 1.38X.

Price/Sales Ratio (F12M)

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So, with GT trading at a discount, should investors seize the opportunity to buy the dip or is caution warranted? Let’s take a closer look.

Goodyear Forward Transformation Plan Bodes Well for GT

Goodyear’s transformative initiative, the Goodyear Forward, is strengthening its prospects. The plan is designed to optimize the company’s portfolio, enhance margins and reduce leverage. Under the program, in January 2025, GT sold its Dunlop brand in Europe, North America and Oceania to Sumitomo Rubber Industries Ltd. for $526 million. In February 2025, Goodyear sold its OTR tire business to The Yokohama Rubber Company Ltd. for $905 million.

By the end of 2025, the company expects Goodyear Forward to deliver $1.5 billion in annual run-rate benefits, driven by cost actions and margin expansion, segment operating margin of 10%, gross proceeds in excess of $2 billion from portfolio optimization and a net leverage ratio of 2.0x to 2.5x.

Electrification Strides Are Strengthening GT’s Prospects

Goodyear is focused on developing tires that will help it transform its portfolio to include more energy-efficient and eco-friendly vehicles. The company is regularly rolling out innovative products and services to boost sales and remain competitive in the market.

The Goodyear ElectricDrive GT, a best-in-class fit-for-purpose tire, especially for EVs, is further boosting the company’s performance. Collaborations with companies like Plus, AutoFleet, Formant, ZF and Gatik demonstrate Goodyear’s efforts to cater to the changing dynamics of the auto industry.

Inflation & Intense Competition Pose Headwinds for GT

Despite its strengths, Goodyear is facing several challenges. While global inflation is showing signs of gradual decline, it is still above pre-pandemic levels. The company expects raw material cost increases of about $350 million in total in the first half of 2025, with about $50 million of that driven by transactional currency impacts. Inflation and other costs are expected to be a headwind of about $75 million, reflecting increases in transportation rates over and above core inflation.

Furthermore, Goodyear faces fierce competition from low-cost imported tires, mainly from Southeast Asia. Many of these countries either don’t have U.S. anti-dumping or countervailing tariffs or have shifted production to avoid these tariffs. The U.S. government has been imposing these tariffs to protect the tire industry from foreign subsidies. However, it is unclear how these tariffs will change in 2025.

Goodyear’s 2025 Revenue Estimates Indicate YoY Decline

The Zacks Consensus Estimate for GT’s first-quarter 2025 revenues is pegged at $4.45, indicating a year-over-year decline of 1.91%.

The consensus mark for GT’s full-year 2025 revenues is pegged at $18.71 billion, indicating a year-over-year decline of 0.87%.

Goodyear Tire Stock: Buy, Sell or Hold?

Goodyear’s transformation initiatives and electrification strides offer long-term growth potential. The company’s shares are trading above the 50-day and 200-day moving averages, indicating a bullish trend.

GT Shares Trade Above 50-Day & 200-Day SMAs

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However, persistent challenges like inflation, intense competition and declining revenue estimates warrant caution.

GT currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point to accumulate the stock.

Key Picks

Some better-ranked stocks in the auto space are General Motors GM and Blue Bird BLBD. GM and BLBD carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for GM’s 2025 earnings has moved north 6.7% over the past 30 days and suggests year-over-year growth of 8.02%. It is currently pegged at $11.45 per share.

The Zacks Consensus Estimate for BLBD’s 2025 earnings has moved up by 3.1% over the past 30 days and suggests yearly growth of 15.61%. It is currently pegged at $4 per share.

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The Goodyear Tire & Rubber Company (GT) : Free Stock Analysis Report

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Michelin (MGDDY) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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