Rising Vehicle Miles And EV Trends Will Boost Premium Tires

Key Takeaways

• Execution ahead of cost-saving targets and premium product innovation are positioning the company for significant margin and earnings growth beyond current expectations.
  
• Strategic manufacturing localization and expansion into EV and digital service segments are supporting sustained market share gains, pricing power, and diversified high-margin revenue streams.
  
• Structural shifts in demand, cost pressures, and lagging innovation threaten Goodyear's market position, profitability, and ability to invest in future growth initiatives.

Catalysts

Develops, manufactures, distributes, and sells tires and related products and services worldwide.

• Analyst consensus expects the Goodyear Forward program to deliver over $750 million in cost reductions by 2025, but this may be conservative as management is executing ahead of schedule with a robust ongoing pipeline of value-add cost projects, potentially enabling a step-change in net margins and earnings beyond initial guidance.
  
• The consensus highlights the Oklahoma modernization adding 10 million units of premium capacity by 2025-2026, but strong evidence suggests Goodyear is already gaining significant share in high-value 18-inch+ tire markets with over 500 new premium SKUs and accelerating OEM traction in EV/luxury segments, positioning revenue growth to outperform consensus forecasts.
  
• Goodyear's U.S. and soon-to-be EU manufacturing footprint is poised to enjoy a structural advantage from tariff-driven localization and tightening global supply chains, setting the stage for sustained market share gains and improved pricing power that can expand both revenue and margins.
  
• The company's aggressive portfolio shift and innovation toward EV
• and autonomous vehicle-ready premium tires, alongside deepening relationships with leading OEMs, is likely to unlock higher average selling prices and recurring supply agreements, fueling outsized revenue and net income growth in emerging mobility segments.
  
• Goodyear's growing investment in intelligent digital tire management platforms and fleet solutions is enabling entry into high-margin, recurring service models-a transition that promises diversified revenue streams and structurally higher returns on capital over the long term.

Goodyear Tire & Rubber Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Goodyear Tire & Rubber compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Goodyear Tire & Rubber's revenue will grow by 1.6% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 2.3% today to 2.1% in 3 years time.
• The bullish analysts expect earnings to reach $402.8 million (and earnings per share of $1.92) by about August 2028, down from $429.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 15.2x on those 2028 earnings, up from 5.8x today. This future PE is lower than the current PE for the US Auto Components industry at 17.1x.
• Analysts expect the number of shares outstanding to grow by 0.4% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.32%, as per the Simply Wall St company report.

Goodyear Tire & Rubber Future Earnings Per Share Growth

Risks

• Persistently high and rising tariffs, along with global supply chain disruptions and factory inefficiencies, are significantly increasing Goodyear's manufacturing costs and eroding margins, posing a long-term risk to net income and earnings growth.
  
• The accelerating influx of low-cost imports, particularly from Asia, is intensifying competition across Goodyear's key markets, forcing pricing pressure and reducing market share, which could suppress future revenue and gross margins.
  
• Ongoing secular shifts toward electric vehicles-which require less frequent tire replacement due to regenerative braking-and consumer migration to ride-sharing services threaten to structurally reduce long-term tire demand, undermining Goodyear's top-line growth potential.
  
• The company's heavy leverage, increased interest expense, and significant pension and healthcare obligations constrain its ability to invest in innovation and growth initiatives, limiting operational flexibility and placing ongoing pressure on net margins and cash flow.
  
• Goodyear continues to lag competitors in next-generation tire technology adoption (such as smart and sustainable tires), risking long-term market share erosion as the industry shifts, which could negatively impact both revenue generation and profit sustainability.

Valuation

• The assumed bullish price target for Goodyear Tire & Rubber is $14.95, which represents two standard deviations above the consensus price target of $11.07. This valuation is based on what can be assumed as the expectations of Goodyear Tire & Rubber's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $15.0, and the most bearish reporting a price target of just $9.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $19.4 billion, earnings will come to $402.8 million, and it would be trading on a PE ratio of 15.2x, assuming you use a discount rate of 12.3%.
  
• Given the current share price of $8.65, the bullish analyst price target of $14.95 is 42.1% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.