Goodyear Tire & Rubber: Riding the Tariff Wave to Undervalued Growth Potential

The global tire industry is a battlefield of costs, tariffs, and strategic maneuvering—and Goodyear Tire & Rubber (GT) is emerging as the unlikely champion. With a 10.5 percentage-point cost advantage fueled by Section 232 tariffs, a $15 price target from BNP Paribas, and a disciplined restructuring plan, GT is primed to outpace peers. Here's why this undervalued stock deserves a closer look.

The 10.5% Cost Edge: How Goodyear Wins the Tariff Game

The Section 232 tariffs, which impose a 25% duty on non-USMCA-compliant tires entering the U.S., have reshaped the industry. For Goodyear, this policy is a strategic windfall.

• Competitive Shield: Only 12% of Goodyear's U.S. tire sales fall under these tariffs, compared to 55% of total U.S. tire imports. This narrow exposure gives Goodyear a 10.5 percentage-point cost advantage over rivals reliant on imported tires.
• Margin Boost: Analyst James Picariello of BNP Paribas notes that this tariff structure allows Goodyear to price competitively while maintaining higher margins. The company's “Goodyear Forward” initiative, targeting over $1.5 billion in savings by mid-2026, further amplifies this edge.

Wall Street's Bullish Call: Why BNP Paribas Sees a 40% Upside

BNP Paribas recently upgraded GT to “Outperform,” citing its unique tariff-driven growth and operational turnaround. Key takeaways from their analysis:
- Tariff-Driven Earnings Growth: The 10.5% cost advantage is projected to fuel price/mix-led EBIT (earnings before interest and taxes) expansion, with estimates rising to $2.8 billion by 2027.
- Debt Reduction: Goodyear's sale of non-core assets (e.g., its European commercial tire business) has slashed net debt by over 20% since 2022, reducing leverage and freeing capital for reinvestment.
- Price Target Justification: The $15 price target implies a 40% upside from current levels, valuing GT at 8.5x 2026 EBITDA—a discount to peers like Michelin (MS.PA) trading at 10.2x.

Margin Improvements and Financial Fortitude

Goodyear isn't just surviving—it's thriving.

• Narrowing Margin Gap: The company's U.S. tire margins have closed to within 3 percentage points of pre-pandemic highs, reflecting both tariff benefits and cost discipline.
• Leverage Reduction: Net debt/EBITDA has dropped to 2.1x, down from 2.9x in 2022, positioning GT to weather economic volatility better than rivals.

The Investment Case: GT is a Buy at These Levels

GT's combination of tariff tailwinds, debt deleveraging, and operational execution makes it a standout pick in an industry still recovering from inflationary pressures.

• Undervalued: At $10.70, GT trades at a 25% discount to BNP's $15 target. Even a conservative 9.5x 2026 EBITDA multiple would push the stock to $13.
• Catalysts Ahead: The full rollout of “Goodyear Forward” savings, margin expansion, and potential share buybacks (if cash flow improves) could accelerate upside.

Risks to Consider

• Tariff Policy Shifts: A reversal of Section 232 could erase Goodyear's cost advantage.
• Commodity Prices: Rising rubber or steel costs could pressure margins, though Goodyear's North American production base mitigates some risk.

Final Verdict: Buy GT for Growth and Value

Goodyear is no longer just a tire company—it's a strategic beneficiary of U.S. trade policy, executing flawlessly to turn tariffs into profits. With a clear path to margin expansion, debt reduction, and outperformance, GT offers rare value in a high-beta sector. Investors seeking a leveraged play on U.S. manufacturing resilience should add GT now—before Wall Street catches on.

The road ahead is paved with opportunity—just ask Goodyear.