HSBC Downgrades Goodyear to Hold, Cuts Price Target Amid Turnaround Concerns

HSBC has downgraded Goodyear Tire and Rubber to Hold from Buy, citing weak earnings and limited pricing power. The bank cut its price target to $9.50 from $15.50 and lowered earnings forecasts for 2025-27. HSBC no longer sees a near-term re-rating story for Goodyear, as higher tariffs and ongoing cost pressures are expected to limit margin improvement. The company's shares trade at a discount to top-tier tire makers, and the analysts see potential for earnings improvement into 2026 but are less convinced in the rerating story.

In a significant move, HSBC has downgraded Goodyear Tire and Rubber (GT) from a Buy to a Hold rating, citing weak earnings and limited pricing power. The bank has also lowered its price target for GT from $15.50 to $9.50 and adjusted its earnings forecasts for the years 2025 to 2027 [1].

The downgrade comes following Goodyear's second-quarter results, which fell short of expectations. The company reported a 5.5% decline in volumes and a 53% year-over-year drop in operating income. While Goodyear expects price versus raw material swings to improve later this year, HSBC has expressed less confidence in a near-term re-rating story [1].

HSBC attributes the company's struggles to several factors, including cost savings from restructuring efforts being offset by higher raw material costs and lower volumes. The bank also notes that higher tariffs and ongoing cost pressures are likely to limit margin improvement in the coming years. HSBC expects the operating margin to reach 7.6% in 2026, only slightly above 2024 levels [1].

Despite the challenges, HSBC acknowledges the potential for earnings improvement into 2026 but remains less convinced about a rerating story. The company's shares currently trade at a steep discount to top-tier tire makers, and HSBC suggests that the gap is unlikely to close unless Goodyear can deliver sustained gains in earnings and free cash flow [1].

Goodyear's stock has faced significant headwinds, including rising tariff costs, declining sales, and relative price weakness. The company's shares have underperformed the S&P 500 Index over the past five years, with the stock down 10% while the index has nearly doubled [2].

In a separate analysis, Zacks Equity Research highlighted Goodyear as a Bear of the Day, noting its challenges with tariffs, declining sales volumes, and relative price weakness. The research firm also pointed out that Goodyear's shares are long-term underperformers [2].

References:

[1] https://au.finance.yahoo.com/news/hsbc-cuts-goodyear-hold-turnaround-142210526.html

[2] https://www.nasdaq.com/articles/robinhood-markets-and-goodyear-tire-have-been-highlighted-zacks-bull-and-bear-day