The Goodyear Tire & Rubber Company (GT) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A reveal a mixed outlook. Positive aspects include new product launches, retail expansion, and a strong SOI growth forecast. However, challenges like high inventories, declining production volumes, and inflationary pressures offset these positives. The Q&A section highlighted uncertainties in market assumptions and management's lack of clear guidance on some issues, such as factory utilization rates. The market cap suggests moderate sensitivity to these factors. Overall, the sentiment is balanced, with no strong catalysts for a significant stock price movement in either direction.
Key Financial Performance
Revenue Fourth quarter revenue was $4.9 billion, representing a year-on-year organic growth of 18%. The increase was attributed to strong execution in price/mix and Goodyear Forward initiatives.
Segment Operating Income (SOI) Segment operating income was $416 million, up about 9% versus last year and up 18% adjusting for divestitures. This marked the highest SOI and SOI margin the company has achieved in over 7 years, driven by strong execution and price/mix.
Free Cash Flow Free cash flow was over $1.3 billion during the quarter, one of the strongest on record. This was supported by proceeds from divestitures and operational improvements.
Gross Margin Gross margin increased by 1 full point during the fourth quarter, driven by strong execution in price/mix and Goodyear Forward initiatives.
Revenue Per Tire Revenue per tire increased by 4% in the quarter, driven by an 8% increase in consumer replacement.
Unit Volume Unit volume declined by 3%, driven by lower consumer replacement and a 14% decline in Americas commercial volume. Consumer OE volume increased by 2%, driven by share gains in EMEA.
Net Debt Net debt declined by $1.6 billion versus a year ago, reflecting benefits from net proceeds of asset sales and operational improvements.
Americas Segment Operating Income Americas segment operating income was $233 million, or just over 8% of sales, driven by price/mix and Goodyear Forward initiatives.
EMEA Segment Operating Income EMEA segment operating income was $114 million, or 7.5% of sales. Excluding insurance recovery, SOI increased by $20 million and margin expanded by 120 basis points year-over-year.
Asia Pacific Segment Operating Income Asia Pacific segment operating income was $69 million, or 13.1% of sales. Excluding the sale of the OTR business, SOI increased by $16 million and margin expanded by 330 basis points.
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Operating Highlights
New Product Launches: Launched 30% more new products than in company history, focusing on high-value segments.
Market Share Gains: Achieved significant market share gains in consumer OE in both the U.S. and Europe, with EMEA registering its eighth consecutive quarter of market share gains.
Pricing Adjustments: Increased pricing in the U.S. and Canada in response to tariffs.
Operational Efficiencies: Delivered $1.5 billion of run rate benefits under the Goodyear Forward program, exceeding initial P&L targets for 2024 and 2025 by over $150 million.
Cost Management: Focused on optimizing manufacturing costs, driving throughput, yields, and efficiencies factory by factory.
Asset Sales: Completed 3 major asset sales in 2025, significantly reducing net debt by $1.6 billion.
Leadership Changes: Appointed Dave Cichocki to lead the Americas and consumer organization, focusing on sales execution and profitable growth.
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Risk or Challenges
Volatile Consumer Replacement Market in Americas: The consumer replacement market in the Americas remained volatile, with U.S. consumer sellout declining despite positive vehicle miles traveled. High levels of channel inventories and increased sell-in discounting and promotional activity exacerbated the situation.
Weak Industry Sellout in January: Industry sellout in January was materially weaker than Q4, down about 5% across the industry, partly due to January storms and frigid temperatures. Consumers are extending the tread on their tires, further impacting sales.
High Channel Inventories: Dealers and distributors are taking action to reduce high channel inventories in the first quarter, which could impact sales and profitability.
Challenging Commercial Truck Market in Americas: Heavy truck builds in the U.S. declined 17% during Q4 as OEMs continued to destock. Commercial replacement industry sell-in leveled out after being artificially inflated earlier in the year.
Regulatory Uncertainty in U.S. Commercial OE: U.S. commercial OE industry volume declined 26% due to ongoing regulatory uncertainty and weak freight conditions.
Anticipation of EU Duties on Chinese Tires: Softening sell-in trends in EMEA consumer replacement market reflected anticipation of EU duties on Chinese tires. The delay in the timeline for a decision on antidumping tariffs adds to uncertainty.
Weak Consumer Sentiment and Extreme Weather: Weak consumer sentiment and extreme winter temperatures in January negatively impacted consumer industry sell-out.
Tariff and Trade Disruptions: Market disruption around tariffs and trade has impacted the company's ability to recover profitable volume.
Inflation and Cost Pressures: Inflation, tariffs, and other costs were a headwind of $227 million in Q4, with continued cost pressures expected in 2026.
Unabsorbed Overhead Costs: Unabsorbed overhead costs due to lower production levels in Q4 and Q1 are expected to be a headwind of $60 million in Q1.
Delay in European Tariff Ruling: The delay in the ruling on potential tariffs on consumer imports in Europe has added to market uncertainty and could lead to another round of low-end imports.
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Guidance & Outlook
Revenue Expectations: First quarter volume is expected to be down approximately 10%, driven by U.S. consumer replacement. Price/mix is expected to be a benefit of approximately $25 million in Q1. Full year raw material costs are expected to be a benefit of $300 million at current spot rates.
Margin Projections: First quarter SOI will be significantly affected by lower consumer replacement volume, fixed cost carryover from 2025, and weak commercial truck trends. Unabsorbed overhead will be a headwind of $60 million in Q1. Goodyear Forward will drive benefits of approximately $100 million in the first quarter and about $300 million for the full year.
Market Trends: Weak industry conditions are expected to continue into 2026, with heavy promotional activity in Q4 2025 inflating channel inventory. Consumer industry sell-out in January was down significantly due to extreme winter temperatures and weak consumer sentiment. In Europe, the delay of the ruling on potential tariffs on consumer imports adds to uncertainty.
Strategic Plans: Goodyear is actively building the next phase of its plan to drive cost efficiencies and increase exposure to structurally attractive parts of the tire market. The company is refining its leadership in the Americas to focus on sales execution, profitable growth, and alignment with global strategy. It is also prioritizing sustainable margin performance and integrating efficiencies from the Goodyear Forward plan.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:How is Goodyear thinking about volumes for the remainder of the year, particularly regarding OE versus replacement?
A:Goodyear expects conditions to improve after Q1, with weather and destocking being major headwinds in Q1. They anticipate a recovery in demand in Q2, with consumer replacement volumes in the Americas expected to be lower year-over-year in Q2 but slightly growing in the second half. Consumer OE should grow starting in Q2. In EMEA, consumer replacement is expected to be softer in the first half due to tariff delays, while commercial OEM replacement volumes are expected to grow slightly. In the U.S., commercial replacement is expected to be stable or slightly down in Q2 and up slightly in the second half.
Q:What is the status of the divested Dunlop units and their impact on volume assumptions?
A:The Dunlop sales in 2025 were closer to 5 million units, and the supply agreements with SRI are a minimum of 4.5 million units. These are excluded from the volume assumptions shared.
Q:What are the Q1 volume setup and industry assumptions?
A:U.S. channel inventories increased about 10% year-over-year due to prebuy of imports and promotional activity. Most of this inventory is expected to decline in Q1, with some flow-through into Q2. Q2 volume in Americas consumer replacement is expected to begin improving but remain below sellout due to inventory clearing.
Q:What are the expectations for 2026 full-year SOI and free cash flow based on volume assumptions?
A:Starting with a base SOI of $815 million, Goodyear expects organic growth of around 10% year-over-year. Assumptions include Q2 U.S. sell-in normalizing with sell-out, stable to slightly down U.S. imports, and slightly up European imports. Free cash flow is expected to be slightly positive, with improvements in restructuring, working capital inflows, and reduced interest expenses.
Q:Does Goodyear's guidance anticipate further improvement in the U.S. commercial vehicle market, and will this improvement spread to other geographies?
A:In the Americas, commercial OE is expected to grow by high teens to low 20% in the second half, but assumptions are not robust. In EMEA, commercial OEM replacement is expected to grow low to mid-single digits. The commercial business in Asia Pacific is not significant. Goodyear aims to run between 12-13 million units in commercial to achieve historical margin levels, compared to 11 million units in 2025.
Q:What is Goodyear's outlook for achieving its Goodyear Forward targets and SOI margin goals?
A:Goodyear remains committed to its Goodyear Forward targets and achieving a 10% SOI margin, though this has been pushed out. Two of the three business units are already at that level, and the commercial business is expected to recover. The company is focused on cost efficiency projects and driving a richer product mix to achieve these goals.
Q:What are the factors contributing to the down 10% volume number for Q1, and what is the global market outlook for the year?
A:The down 10% volume in Q1 is due to significant destocking, promotional activity, and a focus on revenue per tire and mix. The U.S. consumer replacement market is impacted by discounting and promotional activity, while EMEA is affected by delayed EU tariff implementation. The global market outlook includes a focus on premium products and maintaining pricing discipline.
Q:What are the cash flow benefits and working capital management strategies for 2026?
A:Goodyear expects smoother working capital performance in 2026, with better cost management in factories and improved governance. Projects like supply chain financing and efficiency gains in CapEx are expected to contribute to cash flow improvements. The company aims to drive working capital inflows and reduce interest expenses.
Q:What is the inventory situation in the U.S., and how does it relate to rim sizes and promotional activity?
A:The U.S. inventory situation is broad-based across rim sizes and driven by promotional activity. In Q4, 50% of Goodyear's U.S. consumer replacement business was greater than 18-inch, up from 42% in Q4 2024. The company is focusing on premium products and maintaining pricing discipline.
Q:What is the outlook for the U.S. commercial vehicle business and factory utilization rates?
A:Goodyear does not disclose factory utilization rates but notes that the commercial business is facing a perfect storm with emission regulation changes and mothballed tractors. The company is focusing on premium fleets and local business, as well as its truck service centers, to weather the downturn.
Q:What are the implications of the delayed European tariffs and their potential impact on Goodyear?
A:The antidumping investigation on Chinese consumer tires is expected to result in duties between 41% and 104%, with implementation delayed to July 2026. The anti-subsidy investigation is expected to conclude by the end of 2026. These tariffs are expected to improve competitiveness for local production.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer to the question about factory utilization rates in the U.S. commercial vehicle business, stating that they do not disclose this information. Additionally, while they discussed the Goodyear Forward targets and cost efficiency projects, they did not provide specific details on the timeline or magnitude of potential future cost savings.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Americas consumer
Americas opportunity
Americas term
Bo conference
Christina view
Commission investigation
Conference Instructions
EMEA SOI
EMEA perspective
EMEA progress
EMEA run
EMEA sell
EU duty
Europe brand
Forward efficiency
Forward plan
Mr Reed
OEMs replacement
PL commitment
Pacific government
President Executive
President Investor
Profitability
activity
consumer OE
decision
discipline
focus
front
improvement
margin year
market disruption
market share
portfolio product
record
region
result progress
return
team
transformation
vehicle
GT Transcript
The Goodyear Tire & Rubber Company (GT) Q4 2025 Earnings Call Transcript
Unknown2-10
The earnings call summary and Q&A reveal a mixed outlook. Positive aspects include new product launches, retail expansion, and a strong SOI growth forecast. However, challenges like high inventories, declining production volumes, and inflationary pressures offset these positives. The Q&A section highlighted uncertainties in market assumptions and management's lack of clear guidance on some issues, such as factory utilization rates. The market cap suggests moderate sensitivity to these factors. Overall, the sentiment is balanced, with no strong catalysts for a significant stock price movement in either direction.
The Goodyear Tire & Rubber Company (GT) Q3 2025 Earnings Call Transcript
Unknown11-4
The earnings call highlights several challenges: a turbulent midterm outlook, raw material and inflationary headwinds, and ongoing restructuring efforts. Despite some positive aspects like new product launches and strategic partnerships, the Q&A reveals concerns about market contraction, tariff impacts, and lack of clear guidance. The strong OE performance in EMEA and potential insurance recovery are positives, but overall, the negative factors, including lower operating income and uncertainties, outweigh the positives, leading to an expected negative stock price movement.
The Goodyear Tire & Rubber Company (GT) Q2 2025 Earnings Call Transcript
Unknown8-8
The earnings call summary reveals several challenges: declining volumes in key regions, significant losses in EMEA, and increased costs due to tariffs and inflation. The Q&A section highlights additional concerns such as low-cost imports, ongoing tariff impacts, and manufacturing inefficiencies. While there are some positive long-term initiatives, the immediate outlook is clouded by uncertainties, weak demand, and cost pressures. These factors suggest a likely negative stock price reaction in the short term.
The Goodyear Tire & Rubber Company (GT) Q1 2025 Earnings Call Transcript
Unknown5-8
Despite challenges like lower sales, unit volume, and gross margin declines, Goodyear's strategic asset sales and debt reduction initiatives provide a positive outlook. The Q&A reveals potential growth in Asia-Pacific and efforts to mitigate tariff impacts, but concerns about inventory and unclear management responses temper optimism. The market cap suggests a moderate reaction, resulting in a neutral stock price movement prediction.
GT Slides
Goodyear Q4 2025 slides: Strong cash flow and margin gains amid industry headwinds2026-02-09
Goodyear Q3 2025 slides: Transformation program delivers despite volume decline2025-11-03
Goodyear Q2 2025 slides reveal 52% drop in operating income, shares tumble2025-08-07
Goodyear Q1 2025 slides: Sales decline as transformation plan delivers $200M in benefits2025-05-07
GT Report
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