Deutsche Bank lifts Goodyear stock rating to Buy, sets $13 target

On Monday, Deutsche Bank (ETR:DBKGn) analysts upgraded Goodyear Tire & Rubber shares (NASDAQ:GT) from Hold to Buy, setting a price target of $13.00. The upgrade reflects the firm’s confidence in Goodyear’s operational strategy and potential for cost savings.

The company has recently completed the sale of its OTR business and announced the divestiture of its Dunlop IP. Additionally, Goodyear has maintained its timeline to finalize the sale of its Chemicals division before the year’s end. These developments are part of the company’s broader Goodyear Forward initiative, which aims to achieve $1.5 billion in cost savings and margin improvements by 2026. With a significant debt burden of $8.8 billion and a debt-to-equity ratio of 1.85, these strategic moves are crucial. InvestingPro data reveals the company’s Financial Health score as "FAIR," with detailed analysis available in the Pro Research Report.

Deutsche Bank’s decision comes in the wake of recent tariff policies that could potentially benefit Goodyear, given that its U.S. demand is largely met by domestic manufacturing. The tariffs, which were announced last week, currently do not affect tires. Consequently, the impact of these tariffs on new vehicle sales may be mitigated by Goodyear’s increased focus on the more profitable replacement tire market.

Despite acknowledging the risks associated with execution, Deutsche Bank believes that Goodyear is operationally well-positioned to outperform in the market. The current valuation of the stock is considered to be at trough levels, trading at approximately 3.75 times Deutsche Bank’s estimated 2025 EBITDA.

The price target of $13.00 represents nearly a 50% upside from the current level, based on a 4.5 times multiple of the estimated 2025 EBITDA. This optimistic outlook is underpinned by the company’s strategic actions and the favorable industry conditions that could advantage Goodyear in the near future. With current EBITDA at $1.6 billion and an EV/EBITDA ratio of 6.68, InvestingPro subscribers can access 10+ additional exclusive insights and comprehensive valuation metrics to make informed investment decisions.

In other recent news, Goodyear Tire & Rubber Company reported fourth-quarter results that surpassed analyst expectations. The company posted adjusted earnings per share of $0.39, exceeding the consensus estimate of $0.30, and revenue reached $4.94 billion, above Wall Street’s forecast of $4.91 billion. Despite a 3.3% decline in sales and a 4% drop in tire unit volumes year-over-year, segment operating income increased by 0.5% to $385 million. Looking ahead, Goodyear anticipates first-quarter 2025 earnings per share of $0.28 and revenue of $4.60 billion, both surpassing analyst projections. The company also reaffirmed its Goodyear Forward targets, emphasizing significant deleveraging in 2025.

Additionally, Goodyear’s Board of Directors approved amendments to the Outside Directors’ Equity Participation Plan, increasing the annual equity grant for directors from $160,000 to $180,000. The plan now allows directors to defer receipt of common stock represented by restricted stock units starting in April 2025. Meanwhile, TD Cowen initiated coverage on Goodyear shares with a Buy rating and a price target of $14, highlighting optimism about a two-phase turnaround plan under new leadership. The first phase, expected in 2025, will focus on reducing debt and cost-saving measures, while the second phase, slated for 2026, aims to increase tire volumes. These developments reflect Goodyear’s strategic efforts to improve its financial stability and market position.

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