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Investing.com -- HSBC downgraded Goodyear Tire (NASDAQ:GT) & Rubber to Hold from Buy, saying weak earnings and limited pricing power have reduced confidence in the company’s turnaround.
The bank cut its price target to $9.50 from $15.50 after Goodyear’s second-quarter results fell well short of expectations, with volumes down 5.5% and operating income dropping 53% year on year.
HSBC said cost savings from restructuring efforts were largely offset by higher raw material costs and lower volumes, resulting in only modest net savings.
While Goodyear expects price versus raw material swings to improve later this year, HSBC said it no longer sees a near-term re-rating story as likely.
Most of its earlier optimism was based on a valuation catch-up with higher-quality peers, a scenario the analysts now say could take much longer to play out.
HSBC lowered its earnings forecasts for 2025-27, noting that higher tariffs and ongoing cost pressures are likely to limit margin improvement even as raw material headwinds ease. It expects operating margin to reach 7.6% in 2026, only slightly above 2024 levels.
Goodyear shares trade at a steep discount to top-tier tire makers, and HSBC said that gap is unlikely to close unless the company can deliver sustained gains in earnings and free cash flow.
“We still see potential for earnings improvement into 2026e, but we are less convinced in the rerating story after recent results,” the analysts wrote.