TLDR
- Goodyear reported Q3 CY2025 revenue of $4.65 billion, which was slightly below estimates.
- Adjusted EPS of $0.28 significantly exceeded Wall Street forecasts.
- Operating margin declined year over year, reflecting higher costs.
- Free cash flow remained negative but improved compared to the same quarter last year.
- Shares dropped around 2% after the earnings release.
The Goodyear Tire & Rubber Company (GT) stock was trading at $8.77, down 2.07%, during the latest Nasdaq session as investors reacted to the company’s Q3 CY2025 earnings.
While Goodyear delivered a strong profit beat, revenue came in slightly below Wall Street expectations, leading to a mixed market response.
The global tire manufacturer reported quarterly sales of $4.65 billion, representing a 3.7% year-on-year decrease and missing analyst estimates of $4.68 billion. Despite the softer top line, profitability exceeded expectations, providing some reassurance amid a challenging operating environment marked by global trade disruptions.
Earnings and Margin Performance
Goodyear posted adjusted earnings per share of $0.28, which was well above the $0.16 forecast. This marked a 72% upside surprise, although EPS decreased from $0.37 in the same quarter last year. Adjusted EBITDA reached $472 million, surpassing analyst expectations of $439.6 million and translating to a 10.2% margin.
However, the operating margin told a less favorable story. Goodyear reported an operating margin of 3.2%, down from 5.6% in the previous year. The decline suggests that higher operating expenses, including marketing, research, and administrative costs, impacted profitability despite better-than-expected earnings.
Chief Executive Officer Mark Stewart stated that the company delivered a significant increase in segment operating income compared with the second quarter, even as the industry faced ongoing trade-related challenges.
Cash Flow and Balance Sheet Trends
Free cash flow remained negative at -$181 million, though this was an improvement from -$351 million in the same quarter last year. The reduced cash outflow indicates better working capital management, although sustained positive free cash flow remains a key focus for investors.
Goodyear’s market capitalization stands at about $2.56 billion, reflecting ongoing investor caution toward cyclical industrial names facing cost pressures and uneven demand.
Revenue Growth and Volume Dynamics
Looking beyond the quarter, Goodyear’s longer-term revenue performance provides mixed signals. Over the past five years, sales grew at a compounded annual rate of 8.1%, slightly above the average industrials company. This suggests the brand and product portfolio have maintained relevance in global markets.
Recent performance, however, shows a sharp shift. Over the last two years, it has declined at an annualized rate of 5.4%, highlighting softer demand and industry headwinds. Unit sales trends reinforce this picture. Over the same two-year period, Goodyear’s units sold fell sharply on average, indicating that pricing actions helped cushion revenue declines.
In Q3, sales volumes rose 5.2% year on year, a notable rebound from steep declines in the prior-year period. Even with this improvement, overall revenue still missed expectations, underscoring the difficulty of translating volume gains into top-line growth amid pricing and mix pressures.
Profitability Over Time
Goodyear has remained profitable over the past five years, but its cost structure continues to limit margin expansion. The company’s average operating margin of 3.5% over that period is low for an industrial business. Operating margin has declined by about 3.3 percentage points over five years, raising concerns about cost control and operating leverage.
This quarter’s margin contraction suggests expenses grew faster than revenue, eroding efficiency gains. Investors will be closely watching for signs that management can stabilize margins as demand conditions evolve.
Outlook and Market Reaction
Analysts expect Goodyear’s revenue to grow about 1.5% over the next 12 months, a modest outlook that lags the broader industrials sector. On the earnings side, forecasts are more optimistic. Consensus estimates call for full-year EPS of $0.46, implying growth of more than 160% year on year.
The stock fell roughly 2% immediately after the earnings release, reflecting disappointment over the revenue miss and margin pressure. While the strong EPS and EBITDA beats were encouraging, investors appeared to want clearer signs of sustained top-line growth and improved efficiency.