Goodyear Q2 2025 slides reveal 52% drop in operating income, shares tumble

Goodyear Tire & Rubber Co. (NYSE:NASDAQ:GT) shares fell 8.09% in premarket trading after the company released its second-quarter 2025 earnings presentation on August 8, revealing a 52.4% year-over-year decline in segment operating income amid challenging industry dynamics.

Executive Summary

Goodyear reported segment operating income of $159 million for Q2 2025, down from $334 million in the same period last year, despite achieving $195 million in cost savings through its Goodyear Forward initiative. Net sales decreased 2.3% to $4,465 million, while tire unit volume fell 5.3% to 37.9 million units.

"Challenging industry dynamics impacting both consumer and commercial" segments were highlighted as a key factor in the results, according to the company’s presentation. These challenges included significant increases in imports, cuts to OE customer production schedules, and soft replacement demand.

As shown in the following overview of Q2 2025 performance:

Quarterly Performance Highlights

The company’s financial results showed significant pressure on profitability, with adjusted earnings per share at ($0.17), a $0.34 decline from the previous year. Segment operating margin contracted to 3.6%, down 3.7 percentage points year-over-year.

Despite these challenges, Goodyear reported net income of $254 million, up 221.5% from $79 million in Q2 2024, likely boosted by gains from asset sales as part of its ongoing portfolio optimization strategy.

The following slide details key financial metrics for the quarter:

Raw material costs emerged as a major headwind, with a $174 million negative impact on segment operating income. This was partially offset by a $91 million benefit from price/mix improvements and $195 million in Goodyear Forward cost savings.

The waterfall chart below illustrates the factors contributing to the year-over-year change in segment operating income:

Segment Performance

All three of Goodyear’s strategic business units faced challenges during the quarter, with the EMEA region showing particular weakness by reporting an operating loss.

The Americas segment, which accounts for approximately 60% of total sales, saw operating income decline by $100 million to $141 million, with margin contracting to 5.3% from 8.9% a year earlier. The company cited a 15% increase in non-USTMA member imports in the U.S. consumer replacement market and a 32% surge in commercial replacement imports as key challenges.

EMEA reported an operating loss of $25 million, down $55 million year-over-year, while Asia Pacific’s operating income fell by $20 million to $43 million, though this was flat year-over-year excluding the impact of the divested Off-the-Road business.

The following slide provides a detailed breakdown of performance by strategic business unit:

Goodyear Forward Progress

Despite the challenging quarter, Goodyear highlighted significant progress in its Goodyear Forward program, which aims to deliver $1.5 billion in cost savings and margin expansion. The company reported $395 million in cost savings for the first half of 2025, putting it on track to achieve its full-year target of approximately $750 million.

The company has also made substantial progress on portfolio optimization, completing the sale of its Off-the-Road business in February 2025 and the Dunlop brand in May 2025. Additionally, a definitive agreement for the sale of its chemical business was signed on May 22, 2025.

As shown in the following update on the Goodyear Forward initiative:

Goodyear reported $1.6 billion in gross asset sale proceeds to date and continues to expect more than $2.0 billion for the full year. These proceeds are helping to strengthen the company’s balance sheet, with total debt reduced by 7.6% year-over-year to $7,836 million and net debt down 8.3% to $7,051 million.

The following slide illustrates the progress made on cost savings initiatives in 2025:

Outlook & Guidance

Looking ahead to Q3 2025, Goodyear expects global unit volumes to decline approximately 5%, with unabsorbed overhead creating a $50 million headwind. The company anticipates a $100 million benefit from price/mix reflecting recent pricing actions, offset by a $50 million increase in raw materials costs.

Tariffs remain a significant concern, with the company estimating an annualized tariff cost on finished goods and raw materials of approximately $350 million. This is reflected in the projected $180 million increase in inflation, tariffs, and other costs for Q3.

The following slide details the segment operating income assumptions for Q3 2025:

For the full year 2025, Goodyear has revised some of its financial assumptions, reducing corporate other Goodyear Forward costs by $15 million, lowering interest expense to the low end of its prior range, and cutting capital expenditures by $50 million to approximately $900 million.

The company’s industry outlook remains cautious, projecting consumer replacement tire industry volumes to be between -2% and 0%, with slight contraction driven by U.S. volatility related to imports and pre-buying. Commercial replacement is expected to range from -2% to 2% growth, primarily driven by imports.

As shown in the following industry assumptions slide:

Competitive Industry Position

Goodyear’s presentation highlighted several industry challenges that are impacting its performance. The company noted "broad-based increases in imports in consumer and commercial" segments, along with "significant cuts to OE customer production schedules" and "soft YTD consumer replacement demand."

In the U.S. market, non-USTMA member imports in the consumer replacement segment increased by 15%, while commercial replacement imports surged by 32%. These import pressures, combined with full U.S. consumer channel inventories and ongoing recalibration of tariffs, are creating a highly competitive environment.

Despite these challenges, Goodyear emphasized its focus on "expanding our portfolio of premium products" and "strengthening partnerships globally with OEMs" as key strategies to maintain its competitive position.

The company’s balance sheet and cash flow metrics, shown below, will be crucial for navigating the challenging industry environment:

This earnings presentation follows Goodyear’s Q1 2025 results, which also fell short of expectations with an adjusted loss per share of $0.04 against a forecast of $0.05 EPS. The consecutive quarters of underperformance highlight the ongoing challenges facing the company despite its restructuring efforts.

The significant drop in Goodyear’s stock price following this earnings release suggests investors remain concerned about the company’s ability to overcome industry headwinds and deliver on its turnaround strategy in the near term.

Full presentation:

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