GT stock | Why Goodyear Tire & Rubber Stock Jumped This Week | Motley Fool

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Why Goodyear Tire & Rubber Stock Jumped This Week

By Demitri Kalogeropoulos – Nov 7, 2024 at 4:02PM

Key Points

Goodyear is in a restructuring process aimed at cutting costs and reducing debt.

The stock might stay under pressure until tire sales volumes rebound.

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Management sees more room to cut costs in 2024.

Goodyear Tire & Rubber (GT 3.36%) investors had a stellar week following the tire giant's positive third-quarter earnings report. Shares jumped 20% through Thursday trading compared to the S&P 500's (^GSPC 0.74%) 4.2% rally, according to data provided by S&P Global Market Intelligence.

That short-term spike removed just a small portion of year-to-date losses for investors in the company, though, which has been posting declining sales in 2024. Yet it could point to more gains ahead for this underperforming consumer staples stock.

Slashing costs

Goodyear announced on Monday that sales continued to shrink year over year, and that earnings declined again. Revenue slipped to $4.8 billion from $5.1 billion, while net loss landed at $34 million, compared to a loss of $84 million in the prior-year period.

Look beyond those headline results, though, and you'll see encouraging progress in the company's cost-cutting initiatives. Operating profit margin in the core U.S. segment improved to 8.8% of sales from 8.3% of sales, and overall adjusted margin ticked up to 7.2% of sales from 6.5% of sales. That improvement marked the company's fourth consecutive quarter of rising profitability. "We are delivering solid results," CEO Mark Stewart said in a press release.

Looking ahead

Goodyear sees room for further cost cuts, both this year and next, leading executives to upgrade their projections for efficiency gains into 2025. Management is aiming to get adjusted profit margin to 10% of sales by late 2025, up from the 5% rate that investors saw in fiscal 2023.

That improvement likely won't be enough on its own to fundamentally change the weak performance story for this stock. Goodyear still needs to get tire volumes rising again, at a minimum.

Yet it is good news that the business is becoming more efficient, paying down debt, and slowing the pace of volume declines in the core tire business. Those wins make the stock worth watching into 2025 for signs that a more significant turnaround is taking shape.