BNP Paribas Exane dubs Goodyear "tariff winner," shares surge

Goodyear shares surged 10.7% after BNP Paribas Exane upgraded the stock to Outperform, citing the company's significant cost advantage from U.S. auto tariffs, estimated at 10.5 percentage points. The analyst highlighted that Goodyear, as the largest North American tire producer, benefits from tariffs on imported tires, with only 12% of its U.S. sales subject to these duties; the firm also raised its price target to $15 from $11 based on anticipated EBIT and EPS growth through 2027, driven by cost savings initiatives and reduced net leverage.

Analysis

Goodyear Tire & Rubber Co. (GT) shares surged 10.7% following an upgrade to Outperform from Neutral by BNP Paribas Exane, which identified the company as a "true tariff winner." This positive reassessment is underpinned by an estimated 10.5 percentage point cost advantage for Goodyear in the U.S. market, directly resulting from Section 232 auto tariffs that levy a 25% duty on approximately 55% of non-USMCA-compliant U.S. tire sales. As North America's largest tire producer, only 12% of Goodyear's U.S. sales are subject to these tariffs, granting it a significant competitive edge and potential for price/mix-driven earnings growth. The analyst anticipates Goodyear will leverage this advantage for earnings upside, highlighting the industry-wide need to price for these tariffs. Furthermore, Goodyear is making progress in narrowing its margin gap relative to competitors and is on a path to reduce net leverage to healthy levels by next year, supported by the 'Goodyear Forward' cost savings initiative, which is projected to achieve over $1.5 billion in savings by the first half of 2026, and successful divestitures. In recognition of these factors, BNP Paribas Exane has increased its EBIT and EPS forecasts for 2026-2027 and raised its price target on Goodyear to $15 from $11, applying an unchanged valuation multiple of approximately 4.4 times estimated 2026 EV/EBITDA, compared to a peer average of 4.9 times, which reflects Goodyear's net leverage and profitability.

Key Decisions for Investors

• Investors should evaluate Goodyear's current valuation against the revised $15 price target, considering the significant and quantifiable 10.5 percentage point cost advantage in the U.S. attributable to tariffs.
• The ongoing 'Goodyear Forward' initiative, targeting over $1.5 billion in cost savings by H1 2026, and progress in reducing net leverage, present key catalysts for potential earnings accretion and improved financial health.
• Monitor the sustainability of the current tariff environment and Goodyear's execution on its cost-saving and deleveraging plans, as these are critical to realizing the projected earnings growth and closing the valuation gap with peers.