Q4 2024 Earnings Summary
- Goodyear's Goodyear Forward initiative is expected to deliver $750 million in cost savings in 2025, enhancing earnings and margins through plant optimization, purchasing efficiencies, and overhead cost reductions. The company feels very strong about achieving these savings, embedding them into their operations.
- The company is launching five new product lines in 2025, targeting high-margin segments and expanding coverage, which is expected to drive volume growth and profitability in the second half as these products gain traction in the market. These products include offerings in the premium tire segments, aiming to meet customer demand and improve mix.
- Goodyear is actively deleveraging its balance sheet, with net leverage reduced to 3x, and plans to use proceeds from asset sales, including $700 million from the Dunlop brand sale, to further reduce debt. This deleveraging is expected to lead to lower interest expenses and improved financial health.
- Goodyear expects significant raw material cost increases in the first half of 2025, totaling approximately $350 million, which may pose a headwind to earnings growth as it typically takes time to offset these increases with price and mix improvements.
- The company anticipates lower volumes in the first half of 2025, expecting a decline of approximately 2% to 3%, due to elevated wholesale channel inventories in the U.S. and lower Original Equipment (OE) production, which could negatively impact revenues and profitability.
- Potential tariffs related to Canada and Mexico are difficult to predict and could present risks to Goodyear's 2025 plan, including increased costs and margin pressure if tariffs are implemented.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | ~3% decline ($5,116M in Q4 2023 to $4,947M in Q4 2024) | Total Revenue dropped by approximately $169M (3%) YoY. This decline likely results from subdued performance in key segments—despite an over 800% recovery in Asia Pacific, pressures in other regions (such as the Americas and EMEA) and possibly non-tire businesses dragged the overall revenue down. |
Tire Unit Sales | Remained dominant (consistent at ~85% of revenue) | Tire Unit Sales continued to be the core revenue driver at $4,183M, consistently accounting for about 85% of total revenue. This stability underscores the resilience of the core tire business even as other revenue segments fluctuate. |
Asia Pacific Revenue | Over 800% increase (from $65M to $606M) | Asia Pacific revenue rebounded dramatically, climbing from $65M in Q4 2023 to $606M in Q4 2024—an increase of over 800%. This turnaround reflects improved market conditions and likely strategic investments that reactivated demand in this underperforming region. |
Operating Income | Swing from a loss of $308M to a positive $92M | Operating Income turned positive, improving by roughly $400M, from a loss of $308M in Q4 2023 to $92M in Q4 2024. This significant rebound was driven by aggressive cost reduction measures, transformation initiatives (like the Goodyear Forward plan), and overall operational improvements. |
Net Income | Improved from a loss of $296M to $76M | Net Income saw a marked turnaround, rising from a loss of $296M in Q4 2023 to $76M in Q4 2024. This improvement is a direct outcome of better operating performance, effective cost controls, and strategic corrective actions implemented over the period. |
Basic EPS | Recovered from –$1.02 to $0.27 | Basic EPS recovered from a negative $1.02 in Q4 2023 to a positive $0.27 in Q4 2024, reflecting the bottom‐line improvements mirrored in operating and net income. This recovery indicates that the initiatives to improve efficiency and reduce costs have successfully translated into shareholder earnings. |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Capital Expenditures | FY 2024 | ~$1.25 billion | $1.188 billion (sum of Q1–Q4 2024 CapEx) | Beat |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Goodyear Forward cost savings | Q1: Projected at least $350M in 2024; contributed $72M in SOI improvement. Q2: Contributed $90M, mostly purchasing. Q3: Delivered $123M, raised 2024 target to $450M. | Increased target to $750M, embedding savings into operations, focusing on footprint optimization ($300M) and purchasing ($200M). | Expanded |
Margin expansion and 10% SOI target | Q1: Reiterated confidence in hitting 10% by end of 2025. Q2: Reached 7.4% margin, nearly triple the prior year. Q3: 7.2% margin, reaffirmed reaching 10% by 2025. | Achieved five straight quarters of expansion; on track for 10% SOI margin by Q4 2025. | Consistently improving |
Raw material cost headwinds | Q1: Benefited by $261M yet faced -$134M price/mix. Q2: ~$50M increase offset by favorable price/mix. Q3: ~$100M increase in Q4, $300M in early 2025. | Facing $350M in H1 2025, plus $100–150M more in H2 if spot rates hold. | Increasing |
Volume fluctuations in replacement and OE | Q1: Replacement -7%, OE +9%. Q2: Replacement -7% due to high imports. Q3: NA replacement down ~9% last nine quarters, offset by share gains in OE. | Americas replacement down (~1M units), OE in US +20%. | Mixed |
Competition from low-end imports | Q1: Imports reached 25% in US; rising in EU. Q2: Market flooded by low-end imports. Q3: Continued pre-buy of Tier 4 tires, up 17% YoY. | Reached all-time highs in the US amid channel stocking and tariff avoidance. | Sustained pressure |
Balance sheet deleveraging and net leverage reductions | Q1: Discussed free cash flow improvement, but no direct net leverage detail. Q2: No notable mention. Q3: Targeted 2–2.5x net leverage by end of 2025, using asset-sale proceeds. | Net leverage reduced to 3x; OTR sale proceeds used to repay $500M notes; aiming for 2–2.5x by 2025. | Further deleveraging |
Potential tariffs in North America | Q1: Pre-buy activity due to possible Thai tariffs. Q2: Not mentioned. Q3: Ongoing pre-buy of Tier 4 imports on tariff concerns. | Watching tariff impacts on Canadian/Mexican supply; remain agile. | Ongoing |
Asset sales (including Dunlop brand) to reduce debt | Q1: Portfolio review with no specifics. Q2: Not mentioned. Q3: Three identified divestitures (OTR, possibly Dunlop). | Closed OTR sale in Feb. 2025, Dunlop sale expected mid-2025 ($700M proceeds), focusing on debt repayment. | Active disposals |
New premium product lines and SKU expansions | Q1: WeatherReady 2 launch, broader EV coverage. Q2: Focus on industrializing premium SKUs. Q3: Introduced Assurance WeatherReady 2, Eagle F1 lines with ~150+ SKUs. | Announced five new US product lines for 2025, covering large rim SKUs. | Further rollout |
Plant optimization and overhead cost reductions | Q1: Reduced 1,200 positions in EMEA, focusing on plant-specific efficiency. Q2: Emphasized manufacturing efficiency, real estate optimization. Q3: Closed Malaysia plant, contributed to $123M savings. | Modernizing footprint under a single global structure; SG&A down $77M. | Ongoing rationalization |
Negative free cash flow in Q3 2024 | Q1: Not mentioned. Q2: Not mentioned. Q3: -$340M free cash flow due to timing of payments and rationalization. | 2024 free cash flow slightly negative overall, attributed to restructuring programs. | Continuing but seasonal |
Deliberate exit from low-margin businesses | Q1: Identified and exited low-margin accounts. Q2: Rationalizing Tier 3 & 4 exposures. Q3: Reduced ~$200M revenue in US (2–3M units) to focus on profitable volumes. | Asia Pacific volumes down 9% due to exiting lower-margin segments. | Maintained strategy |
Latin America volumes | Q1: No significant mention. Q2: Temporary softness (distribution shifts, flooding). Q3: Gained share, but few details. | Expect lower imports in Brazil post new tariffs; mixed outlook overall. | Potential improvement |
-
SOI Outlook and Growth
Q: Will SOI be in line with last year?
A: Management expects Segment Operating Income (SOI) in 2025 to be in line with 2024's $1.3 billion, including insurance proceeds, demonstrating underlying growth of about 10%. -
Volume and Price/Mix Improvement
Q: Drivers of second-half volume and price/mix improvement?
A: Volume is expected to grow in the second half due to low comps and a recovering industry in both commercial and consumer Original Equipment (OE). Price/mix is anticipated to increase materially in Q2 and Q3, driven by first-quarter pricing actions, OE raw material index agreements, and new product launches. -
Free Cash Flow Expectations
Q: Will free cash flow be positive after restructuring?
A: Positive free cash flow is expected in 2025, including $400 million of restructuring costs, driven by an estimated EBITDA of about $2.1 billion. Working capital will be a benefit, and CapEx will be significantly lower than in 2025. -
Restructuring Costs Lower than Expected
Q: Is total restructuring spending lower than planned?
A: Total restructuring costs are now anticipated to be around $800 million, down from the initially planned $1 billion, due to effective negotiations and execution efficiencies. No additional restructuring announcements are planned. -
Balance Sheet and Credit Rating
Q: Any updates on credit ratings and leverage?
A: Net leverage is now at 3x, almost a turn below last year. Management is engaging with rating agencies and expects a more positive outlook, especially after closing the Dunlop transaction, which will bring in $700 million to further deleverage. -
Goodyear Forward Cost Savings
Q: Are cost savings targets at risk given volatility?
A: Management feels very strong about achieving the increased $750 million Goodyear Forward cost savings, driven by efficiency improvements in manufacturing, purchasing, and SG&A. These savings are embedded in the company's operations and culture. -
Raw Material Headwinds
Q: Impact of raw material costs in second half?
A: Raw material headwinds are estimated at $350 million in the first half. If spot prices hold, there could be an additional $100–150 million headwind in the second half of the year. -
Pricing Actions
Q: Any pricing actions taken to offset headwinds?
A: Multiple rounds of pricing actions have been implemented globally since Q3 last year in response to raw material headwinds. Benefits are expected to flow through in Q2. -
New Product Launches
Q: How will new products impact volumes?
A: Five new product lines are being launched globally, adding nearly 200 additional SKUs in high-end segments, expected to contribute to volume growth in the second half. -
APAC Performance
Q: Was APAC's strong margin due to one-offs?
A: No. The strong performance in Asia Pacific is due to robust manufacturing operations, market pricing, and success in the EV segment with new products. -
Chemical Business Sale
Q: Update on the strategic review of chemicals?
A: The review process for the chemical business continues, with interest from strategic and private equity buyers. Management has no further updates at this time.